All Nippon Airways (ANA), Japan’s biggest airline by revenue, announced on February 1, 2018, that it plans to expand its LCCs into medium-length international routes across Asia, due to robust travel demand in the region. The Japanese carrier aims to double sales for its brands Vanilla Air and Peach Aviation with its five year growth strategy through FY 2022.

All Nippon Airways is a major player in the growing budget aviation market in Japan, where its subsidiaries Vanilla Air and Peach Aviation rival with Jetstar Japan, a joint venture between Japan Airlines (JAL) and Australia’s Qantas Airways, as well as a newly re-launched AirAsia Japan, Reuters writes.

As the competition in low-cost aviation intensifies, ANA Holdings (ALNPY) plans to expand flights by its LCCs to sustain growing demand from Asian visitors to Japan, focusing on Southeast Asia. Entering medium-haul aviation markets would mean moving into currently ANA unserved areas.

ANA said its Tokyo-based Vanilla Air and Osaka-based Peach Aviation would look to launch medium-haul flights under 10 hours flying time from Japan, from around 2020. “We see nine-hour, one-way flights in the future,” Senior Vice President Koji Shibata told reporters on February 1, 2018. “We want to use Peach and Vanilla to cover blank areas for All Nippon Airways,” Shibata remarked.

Peach is expanding routes from its bases at Kansai Airport near Osaka and Naha Airport in Okinawa, but flights remain limited to destinations such as mainland China, South Korea and Taiwan. Vanilla operates some flights from Narita Airport near Tokyo to Mactan-Cebu International Airport in the Philippines, but little else for Southeast Asia. ANA plans to first establish routes with the highest demand, Nikkei Asian Review reports.

The company also plans to expand its LCC fleet. In October, 2017, ANA CEO Yumi Hirako told Reuters the airline was considering whether to shift some ageing Boeing 767s from its premium brand to the low-cost branches to start conducting medium-length flights. On February 1, 2018, ANA announced that it planned to introduce “a new small size medium-haul aircraft” for the business, without naming any particular model.

ANA’s strategic growth plans

On February 1, 2018, ANA Holdings (ALNPY) has unveiled its FY 2018-2022 mid-term corporate strategy that aims to achieve sustainable 5-year growth during the period leading up to the 2020 Tokyo Olympic and Paralympic Games, and beyond.

In a statement, ANA Group said it sees major growth opportunities in the current business environment, as a result of increasing demand for travel to Japan and Asia in general. With that, ANA said it expects the LCCs “to play a role in ANA Group’s growth strategies.”

All Nippon Airways aims to double sales for its LCCs from an estimated JPY96 billion ($870 million) for the year ending in March to just under JPY200 billion ($1.8 billion) in FY 2022, Nikkei Asian Review reports.

According to Reuters calculations based on ANA’s results for the first nine months of the FY, operating profit jumped around 25 percent in Q3 to about JPY50.9 billion ($460 million). It is keeping full-year operating profit forecast at 160 billion ($1.5 billion).

In its mid-term plan, the airline disclosed it was aiming for JPY2.45 trillion ($22.4 billion) in revenue in the FY 2022, up by 27 percent from the JPY1.925 trillion ($17.5 billion) seen in the current FY through March. It also expects 50 percent growth in its core international service, Reuters reports.

ANA overtook its once-bankrupt rival JAL in 2016 to become the country’s biggest international airline. It benefitted from JAL’s bankruptcy by winning slots at Tokyo’s Haneda Airport, which is preferred by business travelers.