Japan's ANA to add budget carrier to loyalty programme as leisure demand outperforms-sources

TOKYO, Oct 22 (Reuters) - ANA Holdings Inc will allow customers to redeem frequent flyer miles on its budget carrier Peach as it weighs boosting the proportion of domestic flights flown by the low-cost airline, three sources familiar with the matter said.

Travel demand in Japan is becoming increasingly weighted toward the leisure market due to the pandemic’s impact on business travel and smaller rival Japan Airlines Co Ltd (JAL) has said it is looking to boost its low-cost carrier network.

Budget airlines held only a 17% market share in Japan in 2018 according to CAPA Centre for Aviation, among the lowest in Asia, with the small penetration now offering a growth opportunity in a pandemic-depressed economy.

ANA is expected to announce the frequent flyer programme changes as part of a turnaround plan to be presented in the days after its second-quarter financial results on Oct. 27, the sources told Reuters. The programme had nearly 35 million members, according to ANA’s latest annual report.

A company spokesman declined to comment. The sources spoke on condition of anonymity because they were not authorised to discuss the matter with media.

JAL already allows redemption by its customers of miles for tickets at its budget joint venture Jetstar Japan.

With borders largely shut, ANA plans to suspend a large volume of international flights at three airports in Japan, with about an 80% cutback at Narita airport.

The airline said on Thursday it was considering revamping its business, including reducing its fleet size.

ANA expected to suffer a net loss of around 500 billion yen ($4.78 billion) for the fiscal year to March after the COVID-19 pandemic battered travel demand, a source with direct knowledge said on Wednesday.

As part of its cost-saving efforts, the airline plans to cut its fleet of aircraft by about 25, the source said.

The airline is slashing personnel costs through redundancies and pay cuts, and along with JAL is getting government help, including a waiver on airport landing fees. ($1 = 104.7000 yen) (Reporting by Maki Shiraki; Writing by Takashi Umekawa; Editing by Jamie Freed and Muralikumar Anantharaman)