Shinichi Inoue, President and CEO, All Nippon Airways (ANA) talks to Tony Concil about his passion for diversity and inclusion.
How important is the diversity and inclusion agenda for ANA?
Japan is not a leader in this area, but it is critical. Understanding our customers through a workforce that is equally diverse will help us to create better value. Teams that are diverse perform better.
A good example is the Japanese Rugby team. A few years ago, when Japan hosted the Rugby World Cup, a diverse group of athletes from across the world and different nationalities represented Japan. The team made it into the top eight. Without such diversity, I don’t think they could have accomplished what they did.
If you translate this example into the operations of ANA, it means creating an atmosphere where all employees can bring their best to work. I want to create a culture in ANA where we recognize that we are all different—in ways that we can see and in ways that we cannot see—and we use that diversity to create a better value proposition.
In April 2015, we announced the ANA Group Diversity and Inclusion Promise. Now ANA has committed to having women comprise at least 30% of our managers by the end of this decade. And in 2020, we joined the IATA 25by2025 commitment—the first Japanese airline to do so.
Results, of course, mean more than commitments. Today, about 18% of our managers are women. We have some work to do, but we are on the right path.
Our approach to D&I is based on respect and covers many communities. We also have established corporate policies for the LGBTQ+ community, recognizing same-sex partnerships among our employees and in our loyalty program. This is an area that is very important for me. There is still much to learn and improve, but we are making progress.
Does this approach extend to passengers with disabilities?
To help passengers with disabilities travel with ease and dignity, we have lower check-in counters to enable interaction at eye-level with those using wheelchairs. We have also developed a wheelchair made of resin which allows passage through metal detectors while seated. Our inflight magazine is available in Braille, and we have sign-language translators to help with passengers with hearing disabilities.
What is ANA’s sustainability strategy and how important are sustainable aviation fuels (SAF)?
Sustainability is a societal issue. Solutions for a sustainable world will only be found through a global approach of partnerships.
SAF will be a large part of our efforts. We are working together with other airlines, including JAL, in the World Economic Forum’s Clean Skies for Tomorrow initiative. The aim is to power 10% of aviation with SAF by 2030.
In October 2021 we launched the ANA SAF Flight Initiative. We know how important sustainability is for our customers, so we are working with them to jointly reduce carbon emissions across their supply chains and for their business travel. It is the first such program in Asia. By working with our customers, ANA is able to increase SAF usage and our customers get clear evidence that their transport activities are sustainable. So it is a win-win proposition.
Key challenges are availability and price. SAF is more expensive than conventional jet fuel and there is more demand for SAF than there is supply. One solution is to develop SAF production in Japan. Japanese energy companies are starting to show interest in developing production facilities in Japan. But with limited experience in production and the associated supply chains there is much catching-up to do.
The good news is that the Japanese Government understands this is important and incentives will be needed. However, developing sufficient production capacity in Japan could take until 2030. We are trying to unite governments, producers and airlines to accelerate that.
What are the prospects for Japan re-opening its borders?
It is true that Japan and China remain largely closed to international travelers. In the case of Japan, the biggest wave peaked in February 2022 and the government started a cautious relaxation of measures in March.
Numbers on our routes to North America and Southeast Asia are increasing. But the majority is transit traffic with few passengers able to enter Japan. Normally, with the significant weakening of the yen, travel in Japan would be a bargain and we would expect very strong demand.
Japan’s ministers have begun to travel abroad. This enabled them to see first-hand how the rest of the world is returning to normal. Prime Minister Kishida announced that Japan will be as open as the other G7 countries from June.
How did ANA manage through the COVID-19 crisis?
The crisis is not over. Things are improving, but we cannot take anything for granted just yet. There are three fundamental areas that are helping in the recovery and that will contribute to our future success.
First, we are very carefully working to understand our customers—matching their demands with capacity. We do this in real time with the size of aircraft deployed on a route or by adjusting the number of flights. This helps tremendously with cash preservation. It is a practice that we will continue beyond the crisis.
Second, we have targeted cost reduction of ¥300 billion ($2.3 billion) with a focus on fixed costs. In 2021, we managed to achieve ¥325 billion in cost reductions. Of this, ¥130 billion has been permanently removed from the cost structure, improving the breakeven point for us.
Third, we implemented unique revenue streams. We sold inflight meal products online, converted an A380 to a restaurant, and even sold used catering carts. The latter was requested by our customers and our supply sold out almost immediately. These are not game changers. But they had a positive impact by enabling our staff to experience directly how responding to customer demands leads to revenue opportunities—even without an investment budget.
Who were your most important partners in managing through the crisis?
The crisis made it clear just how important our partners and supporters are, starting with our customers. For example, we had customers from Nagoya dine on our A380s which were at Narita. Nagoya is a short bullet train-ride from Tokyo, but I met some who traveled from Nagoya to Okinawa and back to Tokyo because there is no direct flight to Narita now, and they just wanted to support our flights. That kind of loyalty is inspirational.
Our shareholders were also supportive. They understood that we could not pay dividends and shored-up our capital when needed. Similarly, our bankers helped with loans and other concessions.
Business partners helped too. Several took our staff on secondment, which helped us to avoid redundancies and at the same time presented opportunities for our employees to gain new skills outside the ANA Group. And the government helped with supportive measures to reduce the tax burden and keep people employed.
Underlying all of this were our staff. They accepted restructuring, salary cuts, and no bonus payments for two years.
And lastly, our international partners—members of Star Alliance and other joint venture partners—shared information that gave us a good understanding of the situation in other parts of the world. And I cannot forget IATA’s work as the voice of the industry.
How has war in Ukraine impacted the business?
We do not overfly Russia. We fly to Europe on the Northern Polar route and return via central Asia.
Japanese airlines are not banned from overflying Russia, but we could not take the risk of an irregular operation resulting in a plane needing to land in Russian territory. On a very practical manner, with the financial sanctions in place, it would be difficult to pay for refueling in Russia.
Avoiding Russian airspace adds time and burns more fuel. The result is increased costs and the need for more crew. With fuel prices high already, this is a financial challenge. And longer flight times puts pressure on crew scheduling.
The long-term consequences of the conflict are not yet clear. But I do not expect it to have an impact on demand. We are gradually growing our services to Europe. We maintained service to Brussels even after the conflict developed, as it was the source of vaccination shipments to Japan. Frankfurt has already restarted and we are bringing back London in June.
How do you see the prospects for travel in Asian markets?
We are optimistic. IATA’s own statistics for March show that demand for carriers based in APAC doubled compared with the previous year.
An encouraging trend is with our international traffic tripling from 10% of 2019 levels in January to 30% in May. The biggest improvements are in markets like Indonesia and Vietnam that have relaxed their COVID-19 measures.
What will ANA learn from Peach operations?
I started Peach and remained as its CEO for almost ten years. It is a low-cost carrier and the differences from a full-service operation like ANA are big. At ANA, the focus is on schedules for business travelers. Some people think that a successful LCC is a simplified full-service carrier. That is not true, LCC success is driven by aircraft utilization.
At Peach, we aimed to use the aircraft for 11 hours a day so that we could provide passengers with cheaper fares. The schedules were more of an outcome of aircraft utilization.
I believe that understanding how both business models work is one of my unique attributes. Peach and ANA are both in the ANA group. Both can be successful independently, but each with limits. One of my objectives is to create new value propositions by getting the two airlines to complement each other without compromising their unique business models.
What are the most important skills to be a successful airline CEO?
You need passion to excite people and leadership to direct them. These come together like conducting an orchestra. The conductor creates beautiful music by combining the unique skills and talents of each member. It is the best illustration of the value created by D&I and it describes perfectly the role of the CEO—creating business success by combining diverse talents.