ANA says no World Cup boost on flights

Updated: Tuesday July 09, 2002 05:46 a.m. ET

TOKYO, July 9 (Reuters) - All Nippon Airways Co Ltd (ANA), Japan's second-largest airline, said on Tuesday the soccer World Cup co-hosted in Japan and South Korea hurt, not helped, domestic flight demand.

The number of passengers on ANA's domestic flights fell 6.1 percent in June from a year earlier, while international flights showed a 5.2 percent decline year-on-year.

"To a certain degree, we were hopeful about seeing a boost in World Cup related business, but the passenger figures ran counter to those expectations," Koji Ohno, Executive Vice President at ANA, told reporters at a monthly news conference.

Japan's largest railway operator, East Japan Railway Co (JR East), also said on Tuesday the World Cup related business failed to meet its expectations, despite about two billion yen ($17 million) in additional revenue.

Both ANA and JR East said it saw a slowdown from customers, as many would-be June travellers elected to stay home and watch the matches.

The World Cup letdown for travel operators comes a day after Japan's cabinet office said a government survey showed the World Cup failed to give another sector of the Japanese economy -- shops and restaurants -- the boost that had been expected.

It also casts a shadow on reports which said Japan's co-hosting of the sporting event would boost an economy slowly emerging from a decade-long downturn.

In Tokyo, consumer sentiment deteriorated for the first time in four months in June as shrinking wages overwhelmed Japan's confidence-building performance in the World Cup.

"The general public was undoubtedly ecstatic about the Japanese soccer team having advanced to the second round in the World Cup, far exceeding expectations," said Ryo Hino, economist at J.P. Morgan in Tokyo.

"But the reality of life is that wages are now shrinking by a record margin, and this weighed most on consumer sentiment in June," he said.

The consumer confidence index in a cabinet office survey of 435 Tokyo households taken on June 15 and released on Tuesday fell to 43.1 from 43.5 in May.

EMPTY SEATS

The World Cup downturn pushed domestic passenger figures down 5.5 percent in the April to June quarter from the same period a year earlier. International passenger rates were down 7.5 percent in the first quarter.

Traditionally, Japanese airlines secure most of their profits in the first six months of the business year ending in March from strong demand during the summer months.

The disappointing first quarter comes amid rising competition on domestic routes as industry leader Japan Airlines Co Ltd (JAL) and number three Japan Air System Co Ltd (JAS) look to merge under a holding company from October.

The new company boasts close to half the domestic market, making it comparable with ANA, the long-time domestic leader with a 49-percent market share.

The merged JAL-JAS group said it will also cut rates on domestic fares by 10-percent and freeze the prices at those levels for three years.

As part of its efforts to combat the JAL-JAS company, ANA said last month it reached a basic agreement on a comprehensive alliance with failed domestic carrier Hokkaido International Airlines (Air Do).

It also signed a memorandum to proceed with detailed negotiations, but ANA president Yoji Ohhashi said on Tuesday the details of the tie-up may not be available for another six months.

The tie-up would give ANA access to additional flights on the high demand route between Tokyo and Sapporo on Japan's northernmost main island of Hokkaido.

Shares of ANA closed up 1.22 percent at 331 yen, compared to a 1.77 percent rise in Nikkei 225.

($1-118.55 Yen)

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