UPDATE 1-Japan's ANA to scrap plans to buy Airbus A380-paper

Mon Jan 5, 2009 8:36am GMT

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TOKYO Jan 5 (Reuters) - All Nippon Airways (9202.T), Japan's second-biggest airline, will scrap plans to buy the Airbus A380, as it and bigger rival Japan Airlines 9205.T slash capital spending amid weakening passenger demand, the Yomiuri newspaper reported.

The global economic downturn has been hitting airlines as fewer people travel for business and vacation, forcing carriers to review capital spending plans and ditch less profitable routes.

The paper, without citing sources, said on Monday that ANA would cut capital spending by 100 billion yen to 200 billion yen ($1.09 billion to $2.18 billion) from a planned 900 billion yen in the four years to March 2012.

ANA, which has been considering adding the Airbus A380, Boeing's (BA.N) 747-8 and others to its fleet from fiscal 2012, said that while it has postponed choosing new aircraft, it has not decided to shelve its plans.

"As we said in December, the decision has been postponed and not scrapped," said ANA spokesman Rob Henderson, adding that the evaluation process would remain on hold until business conditions become more favourable.

Meanwhile, ANA spokeswoman Nana Kon said the company had no comment about the change in its capital spending plans as reported in the Yomiuri.

ANA is reviewing its business plans and aims to announce them, including a possible change in its capital spending budget, by early February, Kon said.

Shares of ANA fell 0.9 percent to 351 yen on Monday, against a 2.1 percent jump in the benchmark Nikkei 225 index .N225.

The economic slump has taken a toll on the airline industry, with industry body IATA saying last week that international airlines saw a huge 13.5 percent fall in cargo traffic in November and a 4.6 percent drop in passengers. [ID:nLU83911]

Japan Airlines (JAL), Asia's largest carrier, said last month that it may slash its capital spending budget for the three years to March 2011 by nearly a quarter, prompted by falling demand for international flights. [ID:nT292202]

ANA, meanwhile, cut its full-year operating profit forecast by about one-third in October, saying business conditions were likely to get tougher in the latter half of the business year.

An Airbus sale in Japan would be a big breakthrough for the European plane maker, a unit of European aerospace group EADS EAD.PA, as it has only about 4 percent of the Japanese market, compared with a 50 percent share elsewhere.

The Nikkei business daily had reported in July that Airbus would sell five A380 superjumbo aircraft to ANA, its first sale of the world's biggest passenger plane to a Japanese airline. [ID:nT164531]

ANA is also set to be the first carrier to fly Boeing's B787 Dreamliner, a new fuel-efficient jet that can carry about 800 passengers.

But Boeing last month announced a fourth delay to the delivery of the troubled aircraft because of a strike by machinists and problems with wrongly installed bolts on the first batch of planes. (Additional reporting by Sachi Izumi; Editing by Chris Gallagher)

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