All Nippon Airways (ANA) has unveiled a revamp of its corporate structure to allow it to compete more effectively in its home market.

The move comes in response to the Fair Trade Commission's approval of the merger of Japan Airlines (JAL) and Japan Air System (JAS) (see story below).

In May, ANA released its corporate plan for the next two years through to March 2004, in which it said the main airline will in future act as a holding company for all group operations, including those of subsidiary airlines and hotel and real estate operations. The move is aimed at cutting costs and allowing decisions to be taken more quickly.

As part of the restructuring, subsidiaries Air Nippon and Air Japan will from this year start operating under a unified ANA brand "with the objective of providing customers higher levels of seamless service". A new company, ANA Sales Holdings, will oversee the group's three travel agencies - All Nippon Airways Travel, ANA Sky Holiday Tours, and ANA World Tours. ANA also plans to expand its recently launched ANA Connection, under which smaller domestic airlines not owned by ANA operate flights on behalf of the major carrier. As part of this, it is planning to negotiate a co-operation agreement with struggling small low-fare carrier Air Do.

Since the JAL/JAS merger was announced in November, ANA has faced intense pressure from shareholders to detail how it aims to cope with the new competitive threat. It unsuccessfully sought to have regulators throw out the merger.

Its corporate revamp plan was released a day after Moody's Investors Service said it was considering downgrading its credit rating on the airline. Moody's placed the carrier's Baa3 long-term debt rating "on review for possible downgrade", meaning it could effectively be lowered to junk-bond status.

It is worried ANA's earnings and cash flow "may face downward pressure due to severe price competition from the JAL and JAS group in the domestic market, as well as the more difficult business environment facing ANA due to the weak Japanese economy".

Source: Airline Business