Answer

Case 6: All Nippon Airways

This case study is about All Nippon Airways (ANA), an airline company operating in Japan. In 2012, the company launched two of its low-cost carriers (LCC) known as the Peach Aviation and the AirAsia Japan (AAJ), which had significant differences in their performance. The Peach Aviation had started on a high note with around 67,000 passengers boarding its flights (Kittilaksanawong & Perrin, 2016). In contrast, the AAJ failed to meet its approximated targets, forcing ANA to acquire its full ownership from Air Asia; hence, changing the name to Vanilla Air. This case study evaluates the pros and cons faced by ANA, its decision to enter into a joint venture and its alternatives when entering Japan’s market, the differences between FSCs, LCCs, and business models, the challenges faced by ANA in running two business models and how to overcome them, and ANA’s future action plan.

An airline company such as ANA is likely to face various pros and cons when entering an LCC market in Japan. The advantages to be experienced entail open operation routes and the zone fare system, which promote competition. Open routes encourage the emergence of new airlines while the zone fare system creates fare discounts that enable companies to deal with high and low seasons. The disadvantages of Japan’s LCC market are its limited operation hours, high airport fees and government taxes, and regulations on plane fueling, which discourages boarding during the process, thus hindering 2–5-minute inter-flights (Kittilaksanawong & Perrin, 2016).

ANA’s decision to enter into a joint venture with AirAsia was completely justifiable due to the constantly increasing competition. According to Kittilaksanawong and Perrin (2016), competition in Japan was evident due to the already existing 47 LCCs and the emerging of new airlines such as Tigerair, which would challenge ANA’s superiority in domestic and international markets. Furthermore, the merge of the JAL and the Jetstar airlines also proved to be a threat that forced ANA to collaborate to extend its market position.

When entering Japan’s LCC market, ANA had various alternatives. The alternatives were based on deregulations by the local and national governments, which promoted the easy acquisition of licenses, landing slots, and the general support of the domestic airline’s operations.

Differences in the Flag and full-service carriers (FSCs) and the low-cost carriers (LCCs) can be observed from their management operations and capabilities. FCSs management has a superior advantage regarding control and ownership; hence, one of the critical differences between ANA airlines and the AirAsia group. The ANA airlines being an FSC, had the highest number of shares (51%), which enabled them to control the partnership in terms of voting rights and resources; thus, they could allocate them towards situations they deemed profitable (Kittilaksanawong & Perrin, 2016).

Peach and vanilla airlines’ business models differed from the regular LCC business models due to their respective objectives of promoting differentiation and specific market segments. Peach aviation adopted the ‘differentiation’ strategy to promote the unique ‘taste of Japan’ to a particular market segment. The market segment targeted by Peach was the female population and the first-time travelers; hence, the main reason for targeting the female population was because of the provided colorful and fun atmosphere, which was intended to act as their primary attraction entity. Moreover, ‘the taste of Japan’ to be provided by Peach comprised a fun, humorous flight experience made up of hospitality, reliability, safety, and cuteness (Kittilaksanawong & Perrin, 2016). Additionally, the vanilla LCCs business model was also focused on promoting services to a specific group of individuals. Consequently, according to Kittilaksanawong and Perrin (2016), the market segment mainly targeted by the Vanilla LCCs was mainly comprised of retirees, families, couples, and groups.

By running different business models in its LCCs- peach aviation and AirAsia Japan, ANA encountered various challenges that hindered operations. Multi-brand strategy is an example of a challenge that ANA faced since it had difficulties advertising and communicating to customers the differences between its premium services and LCC services. Additionally, ANA’s main operation base, the Kansai airport, was also shared by its LCCs, projecting fear of their operations over a longer than anticipated period. Furthermore, sharing a similar operation base did not majorly result in attracting new customers but the sharing of ANA’s customers with the AAJ, reducing ANA’s revenues. Lack of common ground is also a significant challenge experienced between the AAJ and ANA since AAJ was focused on maintaining low prices, whereas ANA was concerned with promoting differentiation.

The given challenges experienced can be overcome by ANA through the implementation of various strategies. The strategies entail investing in advertisements to increase brand awareness, acquiring more landing slots to minimize sharing operational base, and adopting well-proven strategies that can be mutually agreed to.

Going forward into the future, ANA should continue striving for success by running dual business models in the LCC market. By continuing to operate dual business models, ANA is expanding its customer base, promoting its brand, and generating more revenue in the domestic market. In contrast, by failure to continue with its experimentation phase in the LCC market, ANA would have provided domestic and foreign competitors with an opportunity to promote their brands and gain a wider market advantage. Additionally, its brand will depreciate, and emerging brands will overtake its influence on international flights. In order to promote business models in the LCC market, ANA should have a plan that entails providing adequate pilots and leveraging resources. However, should ANA discontinue operations in the LCC market, its plans should incorporate promoting customer flight experience, reducing flight cancellations, and maintaining on-time performance.