ANA Targets Southeast Asia After $1.8 Billion Share Sale

All Nippon Airways Co. (9202), Japan’s largest airline by sales, is looking for acquisitions and partnerships in countries such as India and Thailand after raising $1.8 billion in a share sale last year for expansion.

“We’re considering various options, including acquisitions or collaboration with a partner if we find one,” said Osamu Shinobe, who will become president of the airline on April 1, when it becomes part of a holding company. “Our main focus is Southeast Asia. We haven’t made any decisions yet.”

ANA will be following other carriers such as AirAsia Bhd. and Etihad Airways PJSC to look at expanding in Asia. Etihad has said it is in talks with Jet Airways (India) Ltd. (JETIN) for an investment, while AirAsia (AIRA) won approval this month in India to form a joint venture and acquired a stake in Philippine rival Zest Airways Inc.

The Japanese carrier, which in January canceled flights of its Boeing Co. (BA) 787 planes after battery problems, is targeting countries where the carrier already flies, including Myanmar, to expand, Shinobe said. The airline, set to become part of ANA Holdings Inc. next month, started flights with two low-cost carriers last year, one in partnership with a Hong Kong investor and another with AirAsia.

Photographer: Akio Kon/Bloomberg

All Nippon Airways Co. (ANA) incoming President Osamu Shinobe. Close

All Nippon Airways Co. (ANA) incoming President Osamu Shinobe.

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Photographer: Akio Kon/Bloomberg

All Nippon Airways Co. (ANA) incoming President Osamu Shinobe.

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“The strategy we decide on will vary depending on whether we team up with an airline, or whether it’s with an investor,” Shinobe said in an interview in Tokyo on March 14. “New investments will be decided by the holding company.”

The carrier rose 0.5 percent to 210 yen in Tokyo today. The stock has advanced 16 percent this year, compared with a 20 percent gain in the Nikkei 225 Stock Average.

ANA, which started a venture with United Continental Holdings Inc. (UAL) in 2011, predicts the sales gain from the collaboration will more than double in the year ending March as new services and improved connections lure fliers. The venture allows the carriers to coordinate schedules and share revenue and costs.

The Japanese carrier is looking for ways to increase cooperation with United to boost sales, said Shinobe. United plans to start a new service between Denver and Tokyo this year and ANA will monitor the popularity of the route to see if there is demand to add a service of its own, he said.

‘Cannibalization’

“Aligning our Pacific flights with United’s domestic network is the best way to get passengers,” Shinobe said.

ANA is also considering adding flights to Istanbul, where fellow Star Alliance member Turkish Airlines (THYAO) has its hub, Shinobe said. A final decision is yet to be made, he said.

Photographer: Akio Kon/Bloomberg

All Nippon Airways Co. (ANA) incoming President Osamu Shinobe. Close

All Nippon Airways Co. (ANA) incoming President Osamu Shinobe.

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Photographer: Akio Kon/Bloomberg

All Nippon Airways Co. (ANA) incoming President Osamu Shinobe.

The Japanese carrier is looking overseas as domestic competition increases. It raised 174 billion yen ($1.8 billion) through selling shares last year, which it plans to use to buy planes and acquire stakes in other companies, said Ryosei Nomura, a spokesman at the airline.

The carrier jointly founded two domestic low-cost carriers, Peach Aviation Ltd. and AirAsia Japan Co., which started operations last year. It is also competing against a third. Jetstar Japan Co., part-owned by Japan Airlines Co. and Qantas Airways Ltd., also started flying in 2012.

“We have to resign ourselves to a certain amount of cannibalization,” Shinobe said. “What’s important is how the business model develops.”

ANA’s sales in January were cut by 1.4 billion yen after the carrier canceled all flights on its fleet of 787s while investigators probe what caused a fire on a Japan Airlines 787 parked at Boston airport and another lithium-ion battery on an ANA aircraft to emit smoke, leading to an emergency landing.

Boeing last week gained permission to test safety upgrades to the 787 Dreamliner’s battery systems that it said may allow commercial flights to restart within weeks.

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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