Japanese Government Suggests Merging ANA & Japan Airlines

Simple Flying

By Pranjal Pande

Published Nov 25, 2020

TOKYO, JAPAN - APRIL 30: ANA (All Nippon Airways) and Japan Airlines aeroplanes sit unused at Haneda Airport on April 30, 2020 in Tokyo, Japan. As Japan enjoys its Golden Week annual holidays, All Nippon Airways have cancelled 85 percent of domestic flights while Japan Airlines has cancelled around 60 percent as passenger numbers plummet during the countrys ongoing state of emergency caused by the Covid-19 coronavirus pandemic. Both airlines have also hugely reduced their international flights as countries around the world continue to impose draconian travel restrictions. Japan has so far recorded 13,965 infections, 425 deaths and 1,899 recoveries from the virus. (Photo by Carl Court/Getty Images)

A Japanese government advisor has suggested that ANA and Japan Airlines should consider merging as the crisis continues. With both carriers needing government aid in the coming months, it might make sense for them to merge. The news comes weeks after South Korean giants Korean Air and Asiana announced merger plans as well.

getty-400km-busiest-domestic-route — Tail liveries help airline brands across the globe stand out when the public spot their aircraft at airports and in the air. Photo: Getty Images

Changes in the market

According to a Bloomberg report, the merger idea has been floated by Heizo Takenaka, a former minister and advisor to Prime Minister Yoshihide Suga. He has also suggested making bold changes to the Japanese aviation landscape, including adding billions in capital to airlines.

In an interview, Mr. Takenaka said that providing billions in aid is usually seen as unfairly distorting the market. However, the current crisis has allowed governments to inject cash and make drastic policy shifts like never before, something he believes Japan must do as well to remain competitive.

London Heathrow, Airbus A380, Perfect Aircraft — The A380 accounted for 10% of all Heathrow passengers in 2016, helping the airport overcome its slot constraints. and grow passenger numbers. Photo: Getty Images

He mentions Lufthansa's €9bn ($10.7bn) bailout from the German government as one example of these policies, along with many others. Speaking about Japanese airlines, Mr. Takenaka said (translated from Japanese),

"It is natural to stop bleeding by financing with the Development Bank of Japan or using the existing system, but I feel that the time will come when we will have to do it within a larger system. I will do it."

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Possible merger

The most interesting suggestion came about a possible merger, where Mr. Takenaka said, "ANA and JAL should come together at this time." While this would certainly not be easy, now would be an opportunity for such a bold mechanism.

ANA and Japan Airlines (JAL) are both major international and domestic airlines, carrying nearly 100 million passengers combined. However, the carriers tend to be natural rivals, operating similar fleets and destinations. A merger between the two create one of the biggest airlines in Asia, placing it in the top five.

While no plans have been formalized, the news of the merger has airline shareholders very excited. Stocks of ANA's stock price surged from losses to gains upon hearing the news, while JAL stocks rose over 7%.

Is it a good idea?

While an airline merger would reduce overall costs, it does come with many drawbacks. The loss of one major carrier would be a great blow to competition in the massive Japanese market, possibly causing higher fares on domestic routes.

ANA, 2021 Sunrise, Airbus A380 — A second sunrise flight will operate from Haneda with a Boeing 777. Photo: Getty Images

For now, any talk of a merger premature and there is no certainty that it will even happen. While both carriers are financially struggling, domestic traffic is rebounding well and a vaccine could speed an international recovery.

What do you think about an ANA-JAL merger? Would it make sense for the Japanese market? Let us know your thoughts in the comments below!