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March 11, 2022

Launch of ANA low-cost subsidiary could give them a competitive edge

ANA's launch of Air Japan is set to launch within the next couple of years and can boost the airline's competitive edge and inbound travel potential.

By Globaldata Travel and Tourism

ANA is set to launch Air Japan, a new budget airline for international travel, in late 2023 or early 2024. The airline will focus on medium-haul destinations that will differentiate itself from ANA’s other budget airline Peach Aviation. This approach from one of Japan’s leading airlines will help provide them more market coverage in a pivotal time in the travel industry.

Air Japan is set to fill a gap in ANA’s coverage

According to GlobalData’s Q3 Global Consumer Survey 2021, 57% of Japanese respondents stated cheap flights as a deciding factor in booking a holiday, with 56% responding also stating that direct flights were essential. This is important to Japan’s airline industry as demand is already increasing following many countries reducing restrictions surrounding Covid-19. While investment in travel operations may seem risky, now could be the right time to disrupt the marketplace.

The key market for this LCC (low-cost carrier) is likely families and students in the APAC region, particularly destinations that are located four to six hours flight time away. The growing wealth and middle class in this location are fast becoming a lucrative market, with families and students at the centre. Furthermore, as the appetite for international travel increases in Japan, the new airline can offer outbound tourists a range of new destinations to explore. These destinations could include Vietnam, Thailand and Malaysia, all of which have experienced significant growth in outbound tourism between 2009 and 2019, according to GlobalData’s Tourism Demands and Flows Database.

Air Japan aimed at commencing services by April 2022 but was forced to delay until 2023 due to the Covid-19 pandemic. In the restructuring plan released in October 2020, the company said it would create a new brand designed to meet the demand for travel that its flagship subsidiary All Nippon Airways Co and low-cost carrier Peach Aviation Ltd cannot cover. Nevertheless, it could give the airline a competitive edge due to the expansion of its network. From a wider perspective, this will be beneficial for recovery for the Japanese market because low-cost connections to the rest of the Asia-Pacific area are a major driver for tourism and will boost inbound travel potential.

Air Japan will help cut costs in response to the pandemic

The introduction of Air Japan is likely to help ANA cut down costs caused by the pandemic. According to GlobalData’s Tourism Demands and Flows Database, Japan’s inbound travel saw a year-on-year decline of -86% in 2020. This decline reflects the impact the pandemic restrictions had on tourism. However, GlobalData predicts that in 2021, there will be a year-on-year (YOY) increase in international arrivals of 280%. ANA is projecting a net loss for a second straight year for the year ending this month. Therefore, it is ramping up efforts to improve its balance sheet hit by a demand slump due to the pandemic. Should the launch of Air Japan be successful, it could steer ANA into a more profitable period from 2023 onwards.

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