ANA's UK-Tokyo Fares Attract Travel Managers

<I>London</I> - In spite of All Nippon Airways' status as the smallest carrier on the London-Tokyo route, travel managers say that the carrier is currently offering the best deals between those cities.

According to one U.K. travel manager, ANA's discounted fares are 20 to 25 percent less than those of British Airways, and ANA also is significantly cheaper than Virgin Atlantic and Japan Airlines.

At the same time, ANA says it is thriving since introducing the deal 18 months ago after ending double-dipping incentives with both agents and clients in 1995. Since that time, the proportion of Europeans on its London-Tokyo service has risen from 5 percent to 30 percent, while distribution costs per seat passenger mile have fallen 20 percent, the carrier said.

Understanding this apparent win-win situation provides two morals: Airlines and corporate buyers alike can save money by cutting the travel agent out of incentives, even though in ANA's case, only some are passed on to the buyer. And it pays for buyers to shop around instead of dealing with the obvious carriers.

In a few cases, the airline has retained links with agents who can prove their ability to push corporate clients in the airline's direction. In practice, however, the ending of double dipping means that ANA no longer pays overrides to many major business travel agencies and is instead giving more incentives directly to those agencies' clients.

"We passed the benefits on to the corporate market,'' said Paul Layzell, assistant sales and marketing manager at the ANA office in London. "It means in effect that we are able to offer more than our competitors can.''

His assertion is endorsed by the travel manager of a company that has substantial dealings in the Far East. "ANA offers exceptionally lucrative deals,'' the travel manager said.

The ANA strategy was born partly out of necessity, with some of its travel agency agreements coming to an end by mutual consent in 1995. Layzell will not say exactly which agencies these were, but in some cases, they were large ones that had international agreements with the airline.

Since commencing service in 1989, ANA had not been able to rise above the 5 percent European passenger ratio, in spite of what one travel manager called "extremely high" levels of service. The latest example of this is the carrier's new first class, which has one of the longest first-class seat pitches in the world at 83 inches.

There were two reasons for its lack of success. First, in the words of one U.K. business travel agent, "Europeans won't fly with an Asian airline unless it is highly Westernized, like Singapore Airlines or Cathay Pacific.''

The second problem was more serious: Many U.K. agents would not go near ANA because it was competing on a highly lucrative route with their two biggest airline supporters. "If you have a deal with BA or Virgin, you can't support another carrier with far fewer routes,'' the business travel agent said.

Apart from its service standards, ANA did have other selling points. Its huge domestic business makes it the eighth-largest carrier in the world, with numerous connections throughout Asia.

Despite such assets, however, it was clear that the only way to crack the market was to compete on price. Layzell said that not all the axed agency incentives have been passed on to the buyer, hence the fall in distribution costs. However, it still is able to offer lower prices than its competitors.

It also is able to cut its corporate client incentive package in various ways. This includes reduced prices or even the first night free at ANA's 40-plus hotels. Complimentary limousine transfers from Narita Airport can form part of the deal, as can occasional upgrades for senior executives or even automatic upgrades from business class to first class.

Net fares also are an option instead of a rebate, but Layzell said these are rare. "We have very few," he said. "Once they have gone through and costed it, clients don't want it. I can only surmise that this is because they realize their agent is not going to offer its reservation services for love, and it is better to pay them commission and get a kickback at the end of the year.''

Layzell also espouses heresy on another modern assumption--that corporate deals should be based on the ability to shift market share rather than absolute commitments to volume. "Market share is a bit of a trap,'' he said.