Japan’s ANA Holdings is learnt to be looking at acquiring a strategic stake, amounting to 20 per cent, in Vietnam Airlines even as the Japanese carrier looks to consolidate its foothold in the fast growing Asian market, the Financial Times reported.
ANA Holdings has been eyeing investments in a south-east Asian airline for years after raising Y170 billion ($1.4 billion) in an equity issue in 2012, the report stated. However, talks with aviation companies did not fructify.
Last year, the Japanese operator scrapped its $25-million plan to buy 49 per cent of Myanmar’s Asian Wings Airways, saying the competition was intense in the recently opened market.
DEALSTREETASIA had earlier reported that an airline operator from Japan could be the Vietnamese flag carrier’s strategic partner by picking up a 20 per cent stake, after the Southeast Asian airline auctioned nearly 3.5 per cent during its IPO last year. The local government has also revealed its plan to reduce ownership in Vietnam Airlines to 75 per cent.
Vietnam could be an attractive market to ANA, due to the investment cooperation between two countries. Direct investment by Japanese firms into Vietnam more than trebled to $9 billion between 2011 and 2014, compared with the previous four years, while it reached $37.9 billion during the first eight months of 2015, according to the Vietnam Foreign Investment Agency. Japan has been one of two biggest investors in Vietnam, along with South Korea.
Large Japanese corporations that have been presence in Vietnam include Idemitsu Kosan Co. Ltd and Mitsui Chemicals Inc (energy sector), NTT Group (telecom), Canon Inc and Sony Corp (electronics), and Toyota, Honda, Suzuki and Mitsubishi (automobile), among others.
Meanwhile, Shinichiro Ito, ANA chairman, said, his company was in talks with a number of airline groups, targeting to expand internationally and to form alliances in the regional market. The intention is fuelled by the rise in profits from a recent decline in oil prices and an increase in Chinese tourists to Japan.
Ito reportedly said that the consolidation is necessary in the Asian budget airline market, where there are too many competitors. ANA itself is running the Peach and Vanilla low-cost carriers in Japan.
Ito added the number of state-owned carriers, like Vietnam Airlines, made the M&A process more difficult in Asia than in Europe or the US.
“It is almost impossible to close the deal. Therefore, instead of buying up one company, having a little stake in each other, knowing each other, and enjoying synergies — that could be [a] more concrete way of doing this,” Ito said, in the FT report.
But Barclays analyst Ryota Himeno predicts that consolidation among Asian carriers could happen within the next five years, the report added.
“With low-cost carriers increasing their market share, legacy carriers will come under pressure and consolidation is likely to happen. ANA is carefully monitoring those opportunities,” Himeno said, adding that Japanese firms would probably play a key part in an industry shake-up because of their robust cash positions.
According to the analyst, a direct investment into an Asian carrier instead of a business alliance will give ANA more chances to secure more landing slots at Asian airports.
Also this year, ANA beat US-based Delta Air Lines to acquire 16.5 per cent of Japan’s troubled budget carrier Skymark. The deal had been driven more to ensure that rival Japan Airlines did not secure any benefits from Skymark’s woes, ANA’s executives reportedly said.