All Nippon Airways Co., Ltd. Business Information, Profile, and History

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History of All Nippon Airways Co., Ltd.

All Nippon Airways Co., Ltd. (ANA) operates Japan's second largest airline in terms of revenue, behind the now privatized national carrier Japan Air Lines (JAL). However, in terms of passengers carried, ANA ranks in the world's top ten and is Japan's leading airline. ANA has traditionally been engaged primarily in domestic operations but is now competing aggressively with JAL on the lucrative international routes. ANA started regular flights to the United States in 1986, and flights to Europe and other destinations in the succeeding five years. ANA also has an extensive cargo business and, through a number of subsidiaries, is engaged in hotel and resort operation, travel agencies, trading, and restaurants. Nonetheless, All Nippon Airways' namesake airline contributes about two-thirds of the parent company's total revenue.

Founded in the 1950s

The foundation of ANA's success as an international airline lies in the rapid growth of Japan's domestic travel market in the 1950s and 1960s. ANA was originally formed in Tokyo in 1952 as Nippon Helicopter & Aeroplane Transport Co., Ltd. The formation came after the signing of the San Francisco Peace Treaty of April 1952, which effectively ended the American occupation of Japan. A new law was passed by the Japanese government that subsequently allowed for the establishment of private airlines, administered by JDAC, the country's air transport regulatory body.

The founder of Nippon Helicopter and its first president was Masuichi Midoro. At the time of its establishment the company had 28 employees, 12 of whom were board members. The new airline began operations in February 1953 using Japanese pilots and a De Havilland Dove on the busy Tokyo-Osaka route. Initially limited to cargo, the flight began passenger service early the next year.

Other private domestic airlines were beginning to form within Japan, and by 1953 nine had been granted permission by the government. Notable among these was the Osaka-based Far East Airlines, which gained its operating license in 1953. Far East Airlines was founded by Choichi Inoue, who recognized a market for private air travel and began operations in 1953 between Tokyo and Osaka.

Both Nippon Helicopter and Far East Airlines enjoyed success in the following five years with the expansion of networks in eastern and western Japan based around Japan's two main cities, Tokyo and Osaka. At the end of 1956 the two airlines agreed to merge to create Japan's largest private airline. The merged company was called All Nippon Airways Co., Ltd., and the president was Midoro from Nippon Helicopter, the larger of the two companies. Respective networks were combined, and Nippon Helicopter's logo was adopted on all planes. In 1958 eight DC-3s were put into service and stewardesses' uniforms were redesigned and standardized. ANA was rapidly proving to be strong competition for Japan's national carrier JAL on domestic routes.

Jets in the 1960s

In 1962 Midoro became chairman of ANA, making way for incoming President Kaheito Okazaki, whose first move was to acquire the much smaller Fujita Airways in 1963. ANA entered the jet age in 1964 when it purchased three Boeing 727s for use on its Tokyo to Sapporo route and for charter flights.

In 1964 Japan National Railways unveiled the 'bullet train' for operation between Tokyo, Osaka, and other destinations, providing a cheap alternative to air as a means of business travel between Japan's major cities. Japan's economy was encountering explosive growth at the time, with the widespread use of the automobile as a means of transport. ANA realized that it was competing for passengers with rail and road as well as other airlines and embarked on a program of expanding both the size and number of jets it operated. ANA was also eyeing JAL's monopoly on international services from Japan and began lobbying the government to gain access to this lucrative market. A department was formed with the task of preparing for the airline's eventual debut into international air travel.

New Horizons in the 1970s

The foundation of regular international service was laid in 1971 when ANA operated a Boeing 727 charter flight to Hong Kong, its first foray into the market. In 1973, after 20 years of service, ANA carried its 50 millionth passenger.

In 1973 ANA embarked on a diversification strategy that attempted to exploit the growing tourist trade in Japan. ANA Enterprises, Ltd. was formed to operate hotels around the country. The hotel business would come to provide an integral part of the ANA Group's total revenues. Another ANA subsidiary was set up in 1974 with the formation of Air Nippon Co., Ltd. The new airline was intended to serve regional destinations with smaller planes and thus link many remote islands and towns with ANA's network. At this point ANA had the most extensive domestic network in Japan and was seeking to expand. In 1978 ANA took a minor stake in the newly formed subsidiary Nippon Cargo Airlines, on the assumption that it would have access to international freight markets in the near future.

Both ANA and JAL were at the center of a scandal in the 1970s in which it was alleged that the airlines were influenced by leading Japanese politicians, notably Japanese Prime Minister Tanaka, in their decision to purchase aircraft from U.S. manufacturer Lockheed. The scandal led to the resignation of the Japanese government and investigation of the airlines by authorities. Scandal aside, ANA introduced the new Lockheed Tristar on its Tokyo to Okinawa route in 1974. Boeing 747s were introduced five years later on the Tokyo to Sapporo and Tokyo to Fukuoka routes. The problem of severe crowding at Tokyo's Haneda airport was alleviated in 1978 with the opening of the new Tokyo International Airport. From this point on all international travel, which was increasing rapidly, would originate from the new airport at Narita, near Tokyo. By 1980 ANA was the world's sixth largest airline, although it was virtually unknown outside Japan, with its international services limited to charter flights within Asia.

Deregulated in the 1980s

The Japanese government was, however, preparing to deregulate its international air transport market. This was partly in response to international pressure and partly due to market demand for more flights. Foreign airlines such as TWA had enjoyed access to Japan for years, but the majority of outbound passengers traveled on Japan's national airline, JAL. Government doubts about the management of JAL began to surface after the crash of a 747 en route to Osaka from Tokyo in 1984. Over 500 lives were lost in the packed jet and negligent maintenance by JAL was shown to be the cause. JAL was privatized in 1985, and ANA was allowed to compete on international routes. This came after United Air Lines of the United States took over Pan Am's Pacific network. The Japanese government was concerned that Japanese airlines were losing out on the international market and nominated ANA as the second Japanese carrier allowed to fly on overseas routes. ANA was well prepared for this and began cargo service in 1985 and international passenger travel in 1986, with flights first to Guam and then to Washington, D.C., and Los Angeles. (The airline became the only carrier to travel between the U.S. and Japanese capital cities.) ANA initiated its overseas expansion with a huge publicity campaign and a change of logo to the now familiar blue ANA letters on the tailfin of each plane.

With a firm hold on the slowly growing domestic market (a 50 percent market share), ANA embarked on a huge expansion of its international network. Demand for international air travel was booming as the Japanese economy invested heavily overseas. This demand far outstripped supply, with existing landing slots at the main international airports in Tokyo and Osaka inadequate for the traffic. As a result, the government began construction on three major airport projects, including the New Kansai International Airport near Osaka. To meet the huge growth in passenger volume, ANA initiated its ABLE computerized reservation and ticketing system. In 1987 ANA added Beijing, Hong Kong, Sydney, and Dalian to its list of overseas destinations and in the following year Stockholm, Bangkok, Vienna, London, Moscow, and Saipan. This expansion of overseas routes, although meticulously planned, required significant logistical effort. ANA obtained listings on the London and Frankfurt stock exchanges in 1991 in order to raise funds for expansion. Training and recruitment were emphasized to such an extent that a 1991 poll of university graduates revealed that ANA was Japan's most popular company among young graduates. In 1990 ANA established World Air Network, Ltd. (WAC), offering charter flights to destinations in Asia from regional Japanese airports, thus opening up international travel to a larger segment of the population. ANA upgraded its computer reservation system in 1990 with the formation of INFINI, the world's first reservation system to be operated by a consortium of airlines. ANA's partners in the venture were Cathay Pacific Airways, China Airlines, Malaysian Airlines, and several others.

Struggling in the 1990s

As of 1991, ANA was Japan's largest airline and the eighth largest in the world. Air Transport World magazine pronounced it 'Airline of the Year.' With a high standard of passenger service, ANA served some 30 cities in Japan and 19 overseas, operating approximately 500 flights per day.

Japan was one of the most expensive places in the world to operate an airline. ANA created a low-cost, Singapore-based charter subsidiary, World Air Network, in March 1991. ANA leased some aircraft from World Air Network to fly on certain scheduled routes.

The fiscal year ending March 31, 1993, was the worst in Japanese history. JAL lost ¥44 billion (US$404 million) and ANA maintained its profitability only through shrewd aircraft sales. The two airlines soon struck a deal to jointly warehouse parts for the two dozen new Boeing 777s they had ordered.

Both ANA and JAL were constrained in their efforts to cut labor costs due to the job-for-life culture in Japan. However, by late 1994, ANA was planning to reduce its workforce of 14,800 by ten percent within a year and a half, mostly through attrition. It would continue to announce impending staff cuts throughout the decade.

In 1994, ANA finally posted its first loss (¥2.9 billion or US$28 million) in 27 years. Revenues were about $7.5 billion, $1 billion from international service. This area was an important part of the airline's recovery plan; it planned to increase its international business by nearly a third in fiscal 1995. Several new, leased Boeing and Airbus aircraft arrived during the year to meet the projected demand. In contrast, JAL saw its opportunities for growth in the domestic market dominated by ANA.

Domestic traffic, which accounted for three-quarters of ANA's revenues, continued to decline. To counter this, ANA introduced its Hayawari fares in 1995, advance tickets priced less than the bullet trains.

ANA continued to expand its international service. In the fall of 1994, it launched routes to Korea, Singapore, China, Hong Kong, and Australia from the new Osaka Kansai International Airport. The United States was served from Tokyo. ANA was also developing marketing agreements with Air Canada, Austrian Airlines, and Delta. Code share arrangements with Sabena and SAS had collapsed due to cultural differences.

'We do more' was ANA's new slogan. However, what it could not do was turn back the clock to 1952, when the original U.S.-Japan air agreement gave JAL, Northwest, and United Lines incumbent status. Gaining comparable access to the U.S.-Japan market took years of extended negotiations. ANA was also limited in its control of needed take-off and landing slots at Japan's crowded and notoriously inefficient airports. The installation of new runways offered some relief, but this was another process that took years. When finally sealed in February 1997, the new bilateral agreement gave ANA more access to the U.S. market, while giving the U.S. carriers nearly free reign to pick up passengers in Japan and carry them to other points in Asia.

In April 1997, ANA agreed to provide operational support for Skymark Airlines, a new budget carrier in the domestic market. The previous month, JAL announced the formation of its own low-cost domestic unit, JAL Express.

Seiji Fukatsu, a new president brought in to administer ANA's recovery, resigned in May 1997 over resistance to change from former transport ministry bureaucrats on the company's board.

Although ANA's domestic business helped cushion it from the Asian financial crisis, and the continent was slow to recover, ANA's SPEED21 five-year plan aimed to further increase its international business, an area of operations that had never shown a profit. Cost reductions and productivity increases were also made part of the plan.

In the late 1990s, ANA's dominance in the domestic market was threatened by weakening demand and heavy competition from two new start-up airlines, Skymark and Hokkaido International Airlines, 'Air Do' for short. ANA cut routes and reduced the size of its domestic fleet as a result. It also slashed the salaries of its highest-paid employees by as much as 25 percent.

Pilots staged a two-week strike in April 1998 that cost ANA ¥1.7 billion (US$12.5 million). More misfortune lay ahead. On July 23, 1999, an enthusiast of flight simulation games hijacked an ANA Boeing 747, killing the pilot with a knife he had smuggled on board.

By 2000, ANA had joined the Star Alliance and formed a low-cost domestic subsidiary, Air Nippon (ANK), slated to begin operations with a single Boeing 767. It stimulated the domestic market by promotions such as a complimentary ¥10,000 fare between any two points in Japan.

At the end of the 2000 calendar year, the cost-cutting measures seemed to be working. Profits for the fiscal half-year were more than double that of the year before, and the trend was expected to continue.

Principal Subsidiaries: Air Nippon Co., Ltd.; Air Hokkaido Co., Ltd.; All Nippon Airways Co., Ltd.; All Nippon Airways Travel Co., Ltd.; All Nippon Airways World Tours Co., Ltd.; ANA Aircraft Maintenance Co., Ltd.; ANA Enterprises, Ltd.; ANA Information Systems Planning Co., Ltd.; ANA Real Estate Co., Ltd.; ANA Sky Holiday Tours Co., Ltd.; ANA TELEMART Co., Ltd.; ANK Trading Co., Ltd.; Infini Travel Information, Inc.; International Airport Utility Co., Ltd.; Nippon Cargo Airlines Co., Ltd.

Principal Divisions: Air Transportation; Travel Services; Hotel Operations; Other Businesses.

Principal Competitors: Hokkaido International Airlines; Japan Air Lines Company, Ltd.; Japan Air System; Skymark Airlines.

Chronology

• Key Dates:

• 1952: Company is formed as Nippon Helicopter & Aeroplane Transport Co., Ltd.
• 1953: Far East Airlines begins operations.
• 1956: Nippon Helicopter and Far East Airlines merge to form All Nippon Airways Co., Ltd. (ANA).
• 1973: Diversification program begins.
• 1986: ANA begins flying from Tokyo to Washington, D.C.
• 1994: ANA posts its first loss.
• 1997: A new bilateral agreement gives ANA more access to the U.S. market.