ANA’s New Budget Carrier Faces Skepticism Even Before It Flies
(Bloomberg) -- ANA Holdings Inc.’s plan to launch a new low-cost carrier has doubters already, given the coronavirus pandemic’s impact on airlines worldwide and an industry trend toward retrenching.
The company said Tuesday it will launch a new budget brand around fiscal year 2022, targeting medium-distance flights to Southeast Asia and Oceania. That coincided with the carrier unveiling a restructuring plan involving cost reductions and halted plane orders.
“There are significant risks over whether this can be a success,” Goldman Sachs Group Inc. analysts including Ben Hartwright said in a report Wednesday.
There have been few successful regional carriers and the launch of the new brand may impact ANA’s cost efficiencies and add complexities to its operation, the analysts said. The carrier is predicting its biggest-ever operating loss of 505 billion yen ($4.8 billion) for this fiscal year as the pandemic decimates demand.
James Teo, an analyst at Bloomberg Intelligence, said it may not be a good time for ANA to launch a new brand given the investment it requires.
The pandemic has crippled the global aviation industry, with many slashing jobs and securing funding to ride out the crisis. Cathay Pacific Airways Ltd. will close its regional carrier Dragon as it slashes 5,000 jobs. In Japan, overseas visitors to the country fell 99.4% in September from a year earlier as the country largely kept its borders shut.
ANA will try to prevent the new brand from cannibalizing the business of its existing budget carrier, Peach Aviation Ltd., President Shinya Katanozaka said at a news conference.
A rally in ANA shares fizzled out in Tokyo, with the stock being up 0.4% on Wednesday afternoon after rising as much as 4% earlier in the session. The shares have lost 37% this year.
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