Japan’s ANA in US$271m buyout of low cost carrier Peach

PUBLISHED : Monday, 27 February, 2017, 9:27pm
UPDATED : Monday, 27 February, 2017, 9:28pm

ANA Holdings, Japan’s largest airline, said it will increase its stake in low-fare carrier Peach Aviation to 67 per cent from 38.7 per cent.

ANA will spend 30.4 billion yen (US$271 million) on the investment, which essentially will make the budget carrier its own subsidiary and help the flagship carrier gain more market share in the budget travel segment.

Peach chief executive officer Shinichi Inoue and other executives are set to remain in their posts and the budget carrier will retain management independence, according to Bloomberg. “By maximising synergies between Peach and ANA, we, as a leading [low cost carrier, LCC], aim to serve as a bridge in the Asian region,” said Inoue.

ANA, parent of All Nippon Airways, will buy the stock from existing shareholders Hong Kong-based investment firm First Eastern Aviation Holdings and Innovation Network Corp (INCJ) of Japan, ANA said in a statement in Tokyo on Friday.

ANA is the largest shareholder of Peach, followed by First Eastern Aviation with 33 per cent and INCJ with 28 per cent.

The purchase would see Peach become the second low-cost carrier subsidiary of ANA, which already owns 100 per cent of Japan’s Vanilla Air.

“We take the move by ANA management as a positive step to bring a second major LCC under its wings, which would give it more leverage and flexibility in the future, including a possible Peach merger with Vanilla,” Hiroshi Hasegawa, an analyst at SMBC Nikko Securities, wrote in a report on Friday. “That said, we question the price and future return on investment.”

ANA Holdings chief executive Shinya Katanozaka said: “Since Peach launched in 2011, it has become a driving force in Japan’s LCC market and we are proud to support the acceleration of its growth in Asia.

“Peach provides more routes in the Osaka-Kansai region, for both domestic and international flights, strengthening ANA’s position as the airline group of choice for intra-Asia travel.”

Victor Chu, chairman of First Eastern Investment Group, the parent company of First Eastern Aviation Holdings said: “We have done quite well on this (deal). In terms of return on the investment, it is 600 per cent in six years.

“We are proud of what it has achieved over the past six years and [we] will continue to help it on the business side.” Chu said it was not only the “capital gains” that he is happy with, but also being able to achieve a win-win model with ANA.

Additional reporting by Bloomberg