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February 6, 2007 3:23 pm

ANA all business about Mumbai

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Mumbai is to become the destination for Asia’s first all-business class commercial air service in another confirmation of India’s rising global business importance.

New and established airlines have introduced all-business class services on a range of transatlantic routes, particularly New York-London, over the past two years with the aim of developing a market between the chartered corporate jet and the motley three-class jumbo.

All Nippon Airways, Japan’s second-biggest carrier, is to pioneer the model in Asia with a daily service between Tokyo and Mumbai.

ANA’s service, believed to be the first all-business class route connecting to a developing country, is to start on September 1 and use a Boeing 737-700ER outfitted with 36 seats and an extra fuel tank.

ANA is the launch customer for the B737-700ER, which closely resembles the Boeing Business Jet, but Lufthansa, Swiss and KLM use other B737 models for their transatlantic business class flights.

ANA is using the first of its two B737-700ERs for a service connecting Nagoya, Japan and Guangzhou, China starting next month. That aeroplane will have 24 business class and 24 premium economy seats. ANA offered conventional service on the nine-hour route between Tokyo and Mumbai until the September 11 terrorist attacks in 2001. Air India now has a lock on the route with its one-stop service twice a week and two-stop service two other days.

A round-trip ticket on ANA’s all-business class flight will be priced at $3,200, significantly less than the $4,460 rival Japan Airlines charges for a business class round-trip between Tokyo and New Delhi on its three-class jet.

The service comes as the Japanese government works furiously to strengthen its relationship with India, in part as a bulwark against the rapid rise of China.

Investment ties between India and China are still minuscule. In 2005, Japanese investors directed just $265m toward India, compared with $2.1bn to Thailand, according to the Japan External Trade Organisation.

Japanese carmakers, however, are eyeing India both for its growing domestic market and as a low-cost export platform to serve Europe. Indians have purchased 25m motorcycles and scooters over the past five years and carmakers hope that these consumers will eventually upgrade to cars as household income rises.

Nissan Motor is in talks with Renault and an Indian partner about building a factory. Suzuki Motor is to start producing minicars for Nissan in India next year. Honda Motor said last month it would invest $150m-$200m to build its second Indian plant. Both Honda and Suzuki also build motorbikes in India.

Shuichi Fujimura, ANA’s vice-president of network planning, is sanguine about demand on the Narita-Mumbai route. “The current situation has changed drastically compared with five years ago,” says Mr Fujimura. “The Japanese government is trying to promote industrial ties with India. We see demand in the near-term from workers in the IT industry and the auto industry.”

Japan and India are working on a trade agreement to liberalise trade in goods and services, facilitate investment flows and promote economic co-operation in certain sectors. Bilateral trade totalled just $6.8bn in 2005, a trickle compared with the $189.4bn flowing between China and Japan.

“We have been planning this for two years, and we just needed an opportunity,” says Mr Fujimura.

The opportunity came last December, when Shinzo Abe, Japan’s prime minister, and Manmohan Singh, his Indian counterpart, agreed to forge an economic partnership. Part of this deal involved expanding bilateral flights dramatically.

Japan Airlines flies the Tokyo-New Delhi route four times a week. The carrier has estimated that passenger demand, especially from business travellers, will have risen 40 per cent in the fiscal year ending next month over the previous year. JAL is filling a healthy 75 per cent of seats on the route with paying passengers.

Analysts say that ANA’s decision to fly back into India with an all-business class service makes sense. “A smaller aircraft means ANA can be more flexible in its fleet assignment, and, since it has just 36 seats, there should be reasonable demand,” says Satoru Aoyama, airlines analyst at Fitch, the ratings company. “In Japan, the demand to India is either business or discount students. It is not yet a big tourist destination for the Japanese, unlike China or Europe.”

For ANA, the move into India is part of its strategy to diversify its flight network, particularly into rapidly industrialising countries such as India and Russia. Mr Fujimura says North America, Europe and China each contribute about a quarter of the airline’s revenues. “The growth is on the Asian flight routes.”

ANA will consider upgrading to a Boeing 777 or a B787 if the Mumbai flight proves popular. The carrier may also allow Air India or another Indian carrier to sell seats on its flights.

“The risk is high on these flights but so is the return,” says Mr Fujimura from ANA. “We spent 17-18 years in the red, and it was only in the past three years that we are now in the black thanks to realigning our flight schedule. We need to expand into markets that have high growth potential, such as India and Russia.”

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