ANA to buy stake in Philippine Airlines, order 48 narrow-bodies

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ANA Holdings

ANA Holdings (ALNPY) , the parent company of Japan’s largest airline All Nippon Airways, has announced it is to invest $95 million to purchase a 9.5% stake in the parent company of the Philippine flag carrier.

The company has confirmed the news on January 29, 2019, adding that the deal is still subject to “certain” closing conditions. The company claims the move is in line with its international group network expansion strategy for FY 2018 – 2022. For Philippine Airlines this should mean “the dawn of a new era of growth”, according to ANA Holdings’ (ALNPY) statement.

ANA operates 14 flights weekly on 2 routes to the Philippines, whilst Philippine Airlines currently operates 84 flights weekly on 9 routes to Japan. The two carriers have codeshare operations on Japan – Philippine routes and domestic routes within Japan and the Philippines, linking a total of 16 Japanese and 11 Philippine destinations.

Spending big on ANA, Peach’s fleet expansion

ANA has also announced a decision to place orders for 30 Boeing 737 MAX 8 and 18 Airbus A320neo jets. The 737 MAX 8 order, the “first for a Japanese airline”, as the company puts it, includes an option for 10 more aircraft. The 18 A320neos will go to ANA’s subsidiary Peach Aviation.  Deliveries are scheduled from FY2021 to FY2025, according to the company.

Demand remains strong

The news comes amid ANA’s financial statement for for the nine months ended December 31, 2018. The company recorded an increase in operating revenues to $14 billion (1,568 billion yen), while its operating income fell to $1.43 billion (156.6 billion yen, year-on-year).

For this downfall, the company mainly blames expenses related to investment for safety, quality and personnel as well as rising fuel costs. Japan was also struck by numerous natural disasters. However, “robust demand, strong performance in international passenger service and international cargo service” worked to ANA’s advantage.

As for its low cost segment, revenues here increased by 7.5% (year-on-year) to $44 million (4.8 billion yen), due to route network expansion and “the capture of robust inbound travel demand”.

“As a result of steadily increasing and robust demand, operating income for the third quarter alone was 51.4 billion yen, an increase of 500 million yen compared to the third quarter of the previous year, despite continued declines in the first half of the fiscal year due to natural disasters and other factors,” Ichiro Fukuzawa, CFO, Senior Vice President, ANA Holdings (ALNPY) , is quoted in a statement. “This is a great turning point and also a good sign for further profitability.”