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  • ANALYSIS: ANA’s A380s set to make waves in Hawaii

ANALYSIS: ANA’s A380s set to make waves in Hawaii

All Nippon Airways (ANA) will become the first – and last – operator of new Airbus A380s since 2014 in May, in what will be a big bet on the Hawaiian tourist market.

ANA’s A380s will operate thrice weekly on the Tokyo Narita-Honolulu route from 24 May, with 11 other services flown by 787-9s. From July, that will grow to 10 A380 services per week and four 787-9s, while from 1 August the 787-9s will be substituted for 777-300ERs.

At this stage, ANA has not indicated whether its third A380, due in September, will be used to operate twice-daily services with the superjumbo on the Narita-Honolulu route. This suggests it could be an operational spare for the two other A380s – at least in the short term.

Given the capacity growth already baked into the forward schedule, ANA's revenue managers may be relieved that, for the time being, they will not be tasked with filling two Honolulu-bound A380s every day.

BIG KAHUNA

At 520 seats, the A380s will have the second-densest configuration for the type after Emirates' 615-seat variant. ANA's aircraft will be configured with 383 economy seats on the lower deck, and on the upper deck eight first class suites, 56 business class seats, and 73 premium economy.

With all those seats, the A380s will be a significant step up from the 246-seat 787-9s that ply the leisure route – something that runs counter to conventional widsom. Publicly, ANA has said that getting more seats on the Honolulu route will help it to meet strong leisure demand, and particularly open up more redemption opportunities for its frequent flyer members.

But that puts it in a tricky situation of having to manage the costs of the fleet against the relatively poor revenue opportunities afforded by using it on a leisure-heavy route that has few barriers to entry. With Japan Airlines planning to launch a new widebody, low-cost operation in 2020, Honolulu could be on its radar.

In its dense configuration, the unit economics of the A380 should be compelling, particularly against the other carriers with lower configurations. That is offset, however, by having only three airframes to amortise the fixed costs involved in operating its A380s. With the exception of Hi Fly, which has just one A380, the minimum number of the type in a fleet has been six. This indicates that is the level at which economies of scale kick in.

Those issues aside, the A380s will make ANA the leading carrier by seat capacity on Tokyo-Honolulu routes, operating just over 30% of capacity in September 2019, compared to 22% in the same month last year, Cirium schedules data shows.

Tokyo-Honolulu Routes – September 2018

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Tokyo-Honolulu Routes – September 2019

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Source: Cirium schedules data via FlightMaps Analytics

However, it also leaves Honolulu as the sole point of entry to the Hawaiian market, at a time when Japanese travellers are looking at Kona and other Hawaiian destinations. Of course, those destinations can be accessed through connections on Hawaiian Airlines' inter-island network, but with that carrier set to start a joint venture with Japan Airlines, ANA will have to rely on interlines, rather than codeshares, or a revenue-neutral joint venture to feed its passengers to those other islands.

Moreover, the recent trend in the Japan-Hawaii market has been one of fragmentation. JAL's Narita-Kona flights are evidence of that, as is Hawaiian's Haneda-Kona and Sapporo-Honolulu routes.

Japan-Hawaii routes – March 2019

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FlightMaps Analytics

That also touches a unique form of fragmentation in Tokyo – or perhaps more accurately, the drift of routes from Narita to Haneda as more slots open up at the popular downtown airport. ANA itself also operates a daily Haneda-Honolulu service, as does JAL, and both carriers could apply for more frequencies to Hawaii in the next round of slot allocations on the Japanese side.

On the US end, the opening up of 12 more slot pairs for US carriers has seen Hawaiian propose thrice-weekly Haneda-Honolulu flights, while Delta Air Lines has proposed a twice-daily service on the same route. Neither carrier has indicated if their proposals would see them move their existing Narita-Honolulu flights to the new airport, or if they would be standalone routes.

It seems inevitable that neither carrier may gain slots for the Honolulu route, given that Delta, United and American also have a laundry list of routes they are seeking to the continental USA, and the US Department of Transportation will pick the routes it judges deliver the best consumer benefits.

That ruling will occur before October, when the successful carriers will have to file for landing and take-off times with Japanese authorities.

ASIAN CONNECTION

US carriers aside, once the A380s are up and running on their sole route, ANA is likely to take a network approach to the Honolulu, rather than just focusing on point-to-point traffic.

Its growing network in Southeast Asia and into relatively smaller cities in China could prove vital in helping to feed the Honolulu route. That reflects ANA's continued focus on tapping the transit market between Asia and North America, aided by its joint venture with United Airlines on transpacific markets.

Still, geopolitics and the prospect of a Chinese economic slowdown make it a fraught time to place a big bet on Asian tourism to Hawaii.

ANA could shift A380s onto other routes if the Honolulu yields were to deteriorate, but their relatively tight configuration is a contrast to its positioning as a premium international carrier. Cirium's Fleets Analyzer shows that its largest international aircraft, the 777-300ER, has only 264 seats, meaning an A380 would have almost double the capacity to fill if it were deployed on a route such as Narita-Los Angeles.

It is fair to think, though, that Honolulu will be the sole focus of the A380s for some time, especially given their "Flying Honu" livery and the dense seat layout. It is a big bet for a traditionally conservative Japanese carrier. Time will tell if it pays off.

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