ANA to purchase stake in Vietnam Airlines
Japan’s All Nippon Airways has made headway with plans to invest in Southeast Asia’s fast-growing aviation market by agreeing to purchase a stake in Vietnam Airlines.
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Japan’s biggest airline group by revenue has signed a memorandum of understanding with Vietnam Airlines to buy an 8.8 per cent stake for Vnd2.431bn ($108m). The state-controlled airline held an initial public offering in 2014.
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ANA has been looking to invest in a Southeast Asian airline for years, after raising Y170bn ($1.4bn) in an equity issue in 2012, but it has struggled to finalise a deal. In 2014, ANA scrapped its $25m plan to buy a 49 per cent stake in Myanmar’s Asian Wings Airways because of increasing competition.
Shinya Katanozaka, chief executive of ANA, recently told the Financial Times he would step up his international expansion plans this year, ahead of greater competition expected from Japan Airlines, which will have restrictions on its growth plans lifted in March 2017.
These restrictions were put in place as part of JAL’s state-backed bankruptcy restructuring in 2010, which led to it losing its position as Asia’s largest airline by revenue to ANA.
As part of ANA’s deal with Vietnam Airlines, the two carriers will code-share on certain routes between Vietnam and Tokyo. This means both airlines can expand their networks by selling tickets on some of each other’s flights.
The two airlines are also seeking cost savings by combining their operations in aircraft maintenance, catering, check-in and ground handling at airports where they both have a presence, such as Hanoi and Narita. Their frequent flyer programmes will be pooled, and ANA will also have the right to elect one member of staff to the board of Vietnam Airlines.
ANA’s investment in Vietnam Airlines bears some resemblance to one pursued by Etihad Airways, the Abu Dhabi-based carrier, which has been buying minority stakes in other airlines, partly to secure feeder traffic for its long-haul flights.
For ANA, Vietnam could be an attractive market, with Japanese companies making advances into the country as they seek to reduce their exposure to China.
Direct investment by Japanese businesses in Vietnam more than tripled to $9bn between 2011 and 2014, compared with the previous four years, according to the Japan External Trade Organization.
ANA’s aim since 2010 has been to expand its international operations, so that it becomes the biggest part of the group by 2025.
To support this expansion, ANA has agreed to buy three Airbus A380 aircraft, the world’s largest passenger jet. The deal is expected to be announced this month.
ANA is the biggest operator of the Boeing 787 Dreamliner, having taken possession of more than half of the 83 long-haul aircraft it has ordered.
By Tanya Powley & Kana Inagaki - The Financial Times - January 11, 2016