ANA plans transformation post-Covid; the future of legacy carriers?

ANA must rue the day it agreed to take on 3 A380’s.

Japan’s All Nippon Airways announced a huge shift in the way it plans to operate once Covid is behind us. It’s a surprisingly innovative move and could well herald what many of the rest of the worlds legacy carriers will have to do, if they haven’t already started the process.

Accepting that there is going to be a substantial shift in demand, not just in terms of quantity but quality of travel is the first pillar of the airline’s reasoning.

ANA already understands that business travellers are going to be fewer and may never return in the numbers they’d reached in 2019. However they see that leisure travel, visiting friends and family is likely to experience a short boom followed by a consistent ongoing demand.

Accepting that Covid will never truly vanish – even after mass vaccinations it’s largely accepted that it will become a background illness largely affecting the unvaccinated and is likely to remain a threat for years – airlines will high levels of hygiene and precautionary operations are going to be seen as market leaders.

As a result ANA has decided to downsize its overall ANA fleet and make it a premium brand offering on primary routes, most of which will be international. Personalised services, tailored operations and super-hygienic, with greater choice and flexibility will be its hallmarks – at a premium price of course.

ANA will continue to operate Peach as a low cost carrier, simplifying its offering even further and aiming for short haul, inter-city and single class low fare travel. Hygienic but basic. However it will be designed to feed ANA, and mileage award programmes will cross over all brands.

In Financial year 2022, the group will field a completely new brand based on Air Japan. This brand will target mid-range destinations in Southeast Asia and Oceania.

To make the airline quickly viable, ANA will transfer 787’s to Air Japan configured with 300+ seats.

Air Japan Concept livery (unofficial)

Much of this transformation is going to be achieved through a new digital platform called ANA-X, which will be a massive consolidation of all of the airlines data and online driven business, from credit cards and mileage schemes to airline bookings, vacation packages and regional business development strategies around the world.

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Fleet reductions and deferments

The short to medium term problems facing the airline have not gone away, and the decision has been taken to retire all of the airlines 19 777-200’s and four of its oldest 777-300’s which are approaching 23 years of age anyway.

One Boeing 777-300ER was left to be delivered and that has been deferred until late 2021, as has the final A380 which is already complete and sitting at Toulouse. Thats likely to be placed in long term storage now until its delivered.

The next blow came for Boeing – the airline said was looking at ‘extensive’ deferments of the 777-9 delivery schedule. It didn’t say when it might want the aircraft, but the business case for it is almost certainly looking far weaker. Airlines are looking at deferments because they might need them, if it looks like they never will, cancellations seem inevitable.

Lessons for everyone?

For a Japanese airline this is pretty radical stuff, bearing in mind the stoic nature of the country and the general rigid behaviour of its airlines and their almost unbroken duopoly, which has never given them much reason to innovate.

It underlines the crisis the aviation sector find itself in, but this is the first time any of the big legacy carriers has given voice to its future so clearly, and what it plans to do to get itself back on top as things inevitably improve.

Lufthansa in Europe has the framework to operate a similar system, using Eurowings to cover off both its low cost offering and its mid-haul leisure operations, even though Eurowings cost base as been ridiculously high in the past for an LCC.

Will British Airways be enticed into taking a similar path? It’s suffering from a chronic over-reliance on business travellers for its profits. It’s entire strategy was to lean heavily toward the front end of the aircraft, with first and business class – only to find it’s unlikely to ever fill those seats at 2019 levels ever again.

There are plenty of large airlines who must begin to think differently. ANA has been surprisingly up-front and innovative to outline its way out of the current crisis, and that gives me hope that someone somewhere isn’t just looking at the collapse in their cash on hand balance like a deer caught in the headlights, waiting for the truck to hit.