February 1, 2018 / 7:18 AM / a year ago

UPDATE 2-Japan's ANA to expand budget airline business as Q3 profit shines

* Low-cost carriers to launch medium-haul services around 2020

* Q3 operating profit around 50.9 bln yen - Reuters calculation

* Keeps full-year operating profit f’cast at 160 bln yen (Adds more details of strategic plan)

By Minami Funakoshi and Jamie Freed

TOKYO, Feb 1 (Reuters) - ANA Holdings Inc, Japan’s biggest airline by revenue, plans to expand its budget airline business into medium-length international flights due to robust travel demand in Asia after it notched strong third-quarter earnings.

In a new four-year strategic plan, ANA said on Thursday it also planned to use smaller jets in the Japanese domestic market to boost profits and it would look to expand its international flights to new markets such as South America, Africa and Russia.

The airline said it was aiming for 2.45 trillion yen ($22.4 billion) in revenue in the fiscal year 2022, up 27 percent from the 1.925 trillion yen seen in the current fiscal year through March. It also expects 50 percent growth in its core international service, in part by strengthening partnerships with foreign airlines.

The carrier is a major player in the growing budget aviation market in Japan, where its brands Vanilla Air and Peach Aviation compete against Jetstar Japan, a joint venture between JAL and Australia’s Qantas Airways Ltd, as well as a newly re-launched AirAsia Japan.

ANA said Tokyo-based Vanilla and Osaka-based Peach would look to launch medium-haul flights of up to eight hours flying time from Japan, from around 2020.

In October, CEO Yumi Hirako told Reuters the airline was considering whether to shift some ageing Boeing Co 767 aircraft from its premium brand to the low-cost offshoots to start medium-length flights.

ANA on Thursday said it planned to introduce “a new small size medium-haul aircraft” for the business, without referring to any particular model.

Airbus SE on Wednesday said the A321LR, the world’s longest-range single-aisle jet, had made its maiden flight. Rival Boeing Co is studying proposals for a compact twin-aisle jet.

ANA overtook its once-bankrupt rival Japan Airlines Co (JAL) in 2016 to become the country’s biggest international airline and holds a higher Skytrax rating for passenger service and comfort.

ANA benefitted from JAL’s bankruptcy by winning slots at Haneda Airport, the airport preferred by business travellers departing from or arriving in Tokyo.

Operating profit jumped around 25 percent in the three months to December, to about 50.9 billion yen ($465 million), according to Reuters calculations based on the company’s results for the first nine months of the fiscal year.

ANA maintained its forecast that operating profit for the year to March would hit 160 billion yen.

$1 = 109.5100 yen Reporting by Minami Funakoshi in TOKYO; Additional reporting by Jamie Freed in SINGAPORE; Editing by Jacqueline Wong

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