All Nippon Airways (ANA) SWOT and PESTLE Analysis

Strengths

1) Strong market presence in domestic and international services: According to the ranking given by IATA, the company is currently 8th among global airlines in terms of the number of passengers carried within the domestic services and 14th in terms of total number of passengers, including those within international services. ANA is also the largest domestic carrier in Japan providing service to 42.664 million domestic passengers and holds a share of 44.41% in the Japanese domestic passenger services market. Moreover, ANA carried 8.2 million international passengers in 2016. Such strong market presence enables the company to maintain a leadership position and provides a competitive advantage over its peers.

2) Complementary Service portfolio by presence in ancillary services: The company has business operations in following segments: Air Transportation, Airline Related, Travel Services, Trade and Retail and Others. In air transportation segment the company provides domestic and international passenger transportation services along with cargo and mail operations. The Airline Related segment includes ground support services such as baggage handling, passenger check-in and cargo loading services. The Travel Services segment carries out the sales of tickets and branded travel packages. The Trade and Retail segment includes operations of ANA FESTA airport shops, ANA Duty Free stores and the ANA Shopping style mail-order site. Other business segment provides building maintenance and real estate business services. It also offers information systems, product sales, logistics and aircraft parts and repair services. The strong and extensive service offerings through both vertical and horizontal enhance the revenue stream of the company by balancing the overall business risk and providing synergies across segments. It also creates a unique value chain for the company and acts as a differentiation in the highly competitive market segment of operations.

3) Member of Star Alliance Network: ANA is a member of Star Alliance Network, which has 28 member airlines serving through more than 4,631 aircraft across 1,300 airports in 190 countries. Founded in the year 1997, Star Alliance was the first and is the largest airline alliance carrying over 689.98 million passengers annually. The alliance enables its members to provide more services and benefits than any airline cannot provide on its own. Services offered include a broader route network, Co-location at selected airports, opportunities to earn and redeem frequent flyer miles across the combined Star Alliance network along with access to more than 1100 airport lounges. As a result of this the company is able to offer more seamless mode to transportation across destination to its customers and improve its load factor which ultimately results in increased profitability.

Weaknesses

1) Decline in revenues from cargo and travel segments: We can see from the annual report that the revenue from cargo declined by 2.59% from ¥32584 million in 2015 to ¥31740 million in 2016 for domestic operations and 9.1% from ¥124772 million in 2015 to ¥113309 million in 2016 for international operations. This can be attributed to the fact that cargo volume decreased by 1.8% and 3.7% in domestic and international segment caused due to decrease in shipments in both domestic and international markets as a result of softening demand conditions. For the travel segment the revenues declined by 1.02% from to ¥169078 million in 2015 to ¥167349 million in 2016. The domestic segment revenue increased but the international segment was down which can be attributed to yen depreciation and unforeseeable terrorists attack in Europe. This can have material impact on the revenues of the company and lead to lower financial performance.

2) Dependence on Japan for majority of revenues: ANA gets substantial portion of its revenue from domestic operations. This can be substantiated from the annual report where 82.3% of the total revenues was attributed due to operations in Japan and rest was from overseas operation. This high dependency on Japanese market may have an adverse effect on the health of the company due to some negative local conditions or lower than expected growth conditions. It makes the company vulnerable to changes in the economic and political situation of the country. Thus, the company’s high reliance on home market exposes it to risks of downturns created by the country’s macroeconomic conditions resulting in risk in revenue generation.

The unpublished sections of the entire All Nippon Airways (ANA) SWOT analysis is available in the 'Complete Report' on purchase.

References

1. ANA Annual Report 2016: https://www.ana.co.jp/group/en/investors/irdata/annual/pdf/16/16_E_00.pdf

2. Star Alliance facts https://portal.staralliance.com/employees/about/bottom-left/the-star-alliance-network

3. Financial ratios https://financials.morningstar.com/ratios

4. Population report Japan https://data.worldbank.org/indicator/SP.POP.65UP.TO.ZS?locations=JP&name_desc=false

Technological

1. Digitization to improve customer experience: Digitization for airlines has the biggest impact when it is implemented in close cooperation with the airports it operates from. Customer existence is an amalgamation of a number of factors. By integrating with airports, All Nippon Airways is providing an in-flight shopping option through its ANA SKY SHOP that will enhance customer experience by helping them save time. Setting up online call centres which deal with bookings, enquiry queries, check-in, meal requests and more is another way ANA is using digitization to improve customer experience. ANA also appointed Bristol based agency Digital Visitor to handle its social media strategy and maintain its competitive advantage in the digitized landscape.

Environmental

1. Initiatives to become a leading eco-friendly airline: Aviation industry is one of the major industries responsible for carbon emissions accounting for around 12% of CO2 emissions from transport sources. Environmental and consumer sustainability with regards to business operations is critical for consumer-centric aviation player such as All Nippon Airways (ANA). Ana has prioritized Environmental issues which create overall value for the stakeholders and incorporated them into the current corporate strategy. The environmental initiatives undertaken by ANA go beyond just reducing CO2 emissions and the airline is already deploying fuel-efficient aircraft in its fleet. ANA is also testing use Euglena jet fuel, a biodiesel made from green algae at Japan plant. The airline is developing long-term fleet development plans which take care of other important environmental issues and risks such as environmental taxes and noise pollution issues.

The unpublished sections of the entire All Nippon Airways (ANA) PESTLE / PESTEL analysis is available in the 'Complete Report' on purchase.