Bloomberg News

ANA Hones Crisis Management as 787 Grounding Limits Fleet

January 28, 2013

ANA Hones Crisis Management After Grounding of 787s Limits Fleet

A Boeing Co. 787 Dreamliner aircraft operated by All Nippon Airways Co. (ANA) stands on the tarmac after making an emergency landing at Takamatsu airport in Takamatsu, Japan, Jan. 16, 2013. Photographer: Yuzuru Yoshikawa/Bloomberg

Norihiko Matsuda was at a routine meeting at All Nippon Airways Co. (9201) headquarters when he got a message that one of the carrier’s Dreamliners had been diverted. With the airline’s President Shinichiro Ito by his side, news of the plane’s emergency landing came next.

“Ito-san immediately told me to stop all 787 flights,” said Matsuda, 51. “I called the operations center at Haneda airport and gave the order and hopped straight in a cab,” he said, recalling the Jan. 16 incident that led to the global grounding of Boeing Co. (BA:US) 787s.

With 7 percent of its fleet grounded, Matsuda, the airline’s chief crisis manager, and his staff had to craft a solution while canceling the remaining Dreamliner flights with 6,000 waiting passengers. They set up an emergency center at the airport, staffed with pilots, engineers and logistics specialists operating 24 hours a day to minimize disrupting a network of more than 1,000 daily flights and 175 routes.

The response by All Nippon -- with 17 Dreamliners, the biggest operator of the jet -- highlights the challenges the eight customers of the world’s most-advanced passenger jet are having. The worldwide fleet of almost 50 Dreamliners has remained grounded since the Federal Aviation Administration instructed airlines to prove that lithium-ion batteries in the model are safe. The global grounding marks the first time in 34 years that an entire airplane model has been pulled from service.

No Buffer

In Tokyo, All Nippon’s strategy of making the most efficient use of planes means it enjoys the third-highest operating profit in the industry. It also means the carrier had no buffer to rely on when the 787s were pulled from service. The crisis team had to immediately make decisions on what routes to cancel to free up aircraft, where to add more planes, where to increase and reduce frequencies and what type of aircraft to use.

Destinations such as Ube and Okayama in western Japan got 737s and 767s, instead of the 787. Some Boeing 747s were put into longer use with less downtime. Paint jobs were postponed. The goal was to maintain service on all routes, even if it meant canceling some services on other sectors, for example going from seven services a day to six.

“There’s no second-guessing,” said Matsuda.

459 Cancellations

On international flights there was one route -- Tokyo to San Jose, California -- where the carrier had permission only to fly a 787 and so had to cancel all flights. Before changing the type of plane on a route, the carrier also had to make certain the destination airport had the maintenance facilities, slots, and staff for the aircraft.

All Nippon has canceled a total of 784 flights, affecting 74,200 passengers since the day of the emergency landing through Feb. 12, according to figures from the company.

“They’ve coped reasonably well, given the extraordinary situation,” said Nicholas Cunningham, an analyst at Macquarie Capital Securities (Japan) Ltd. “They’ve minimized cancellation of flights and have been fully cooperating with authorities. The grounding is a shortcoming related to the aircraft manufacturer rather than ANA itself.”

All Nippon is the largest operator of 787s because it was the initial customer, taking delivery of the first plane in September 2011. Last year it boosted the order for the composite jet by 11 planes to 66, the most for an airline.

Japan Air

“They’re paying the price for being the launch customer,” said Geoff Tudor, principal analyst for Japan Aviation Management Research, and a former spokesman of Japan Airlines Co.

All Nippon’s shares fell 1.7 percent to 177 yen in Tokyo today, the biggest decline since Nov. 28. The stock is down 4.3 percent since the day before the emergency landing.

Japan Airlines, whose strategy includes buffer capacity, pulled 36 flights since the emergency landing through Feb. 3, affecting 4,840 passengers, according to Sze Hunn Yap, a spokeswoman at the carrier. The airline’s seven 787s make up about 3 percent of its fleet of 217 aircraft. All Nippon has a total of 231 planes.

Leasing other aircraft isn’t a solution as pilots aren’t certified for different aircraft, said Megumi Tezuka, a spokeswoman at All Nippon.

Investigators are focusing their attention to the batteries supplied by Kyoto, Japan-based GS Yuasa Corp. (6674), whose headquarters was repeatedly examined last week.

Battery Fire

The emergency landing of the All Nippon flight followed a battery fire on a Japan Airlines 787 in Boston on Jan. 7. The probe hasn’t yet found out whether those were causes of the blaze or the result.

GS Yuasa may take months to complete its investigation, Hiroharu Nakano, a company spokesman, said Jan. 17. That means Matsuda and his team will still be at the crisis center for the foreseeable future.

“We still don’t know when this will be fixed,” said Matsuda. “We can’t make a final decision on what to do with our fleet until we get to the bottom of the problem.”

The 787’s troubles haven’t damped the enthusiasm of Kazunori Aoe, who was on the plane that made the emergency landing.

“The 787 is a very comfortable plane and I’d like to fly it again,” said the 36-year old, who flies up to three times a month for his job. “I hope they fix the problem quickly.”

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net


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