All Nippon Airways forges regional deal

Bloomberg News Service

TOKYO — All Nippon Airways Co. will enter an alliance with two regional carriers, strengthening its domestic business while its biggest rival is acquiring a major competitor, the Nihon Keizai newspaper reported.

Japan's second-largest airline will enter a code-sharing pact with Fair Inc. and Nakanihon Airline Service Co. for flights out of Tokyo that the two closely held regional carriers are starting in April, the paper said, without citing sources. ANA and the two smaller carriers will jointly operate the new flights and book passengers, the report said.

ANA last month filed a complaint with Japan's Fair Trade Commission, saying Japan Airlines' takeover of Japan Air System would give JAL an "unfair lead to the detriment of competition and passengers." An alliance with smaller carriers would help ANA control more landing slots, an investor said.

Because of the merger between JAL and JAS, ANA's "domestic business is getting tougher," said Seiichiro Iwamoto, who manages about $751.4 million in assets at Fuji Investment Management Co.

A code-sharing agreement with ANA also would provide the latest evidence that smaller carriers are unable to compete with ANA, JAL and JAS, said Iwamoto. "Liberalization set off price cutting, and companies can't be as profitable as they initially thought," he said.

Skymark Airlines Co. and other newcomers have tried to gain business with cut-rate prices since fares were deregulated in 2000. The upstarts have struggled, as the big airlines matched their fares.

ANA expects its alliance with Fair and Nakanihon to help improve its international business from customers who connect to overseas flights from smaller Japanese cities, the report said.