All Nippon Airways (9202 JP)
I haven't been this excited about shorting something since ICICI went crazy with retail credit cards in 2007....
Anyway, here are my quick notes on a very compelling thesis to short All Nippon Airlines in Japan:
Low Cost Carriers (LCC) have begun to enter the market (Skymark, JetStar, Flypeach);
LCC have 10% of the market (and poised to grow exponentially) vs. 37% in the US and 65% in the Phillipines and similar numbers in Continental Europe.
LCC fares have not yet been incorporated into sites such as
Kayak.com or other major online shopping comparison engines but it's clear what is about to happen. flypeach.com and you see their fare of $250...when the information gathering improves, which is an eventuality (knowledge is power after all) there can only be a forced price volume loss for ANA.
Search for a flight within Japan (say, Tokyo to Osaka) and you will only get All Nippon's (ANA) price of $1000; go to an LCC website such as
ANA is about to lose a lot of share and see margins (only at 4%) come under significant pressure due to this phenomenon.
On top of this:
Total air miles traveled in Japan are not growing much...its a highly cyclical industry and with Japan's demographics and loss of business and manufacturing fortunes even domestic institutional travel has slowed down;
Tokyo is adding additional runways, taking away the problem of limited slot supply, which will be key for LCC's to provide multiple options in high thoroughfare sites;
ANA has $10bn of debt vs. a $17bn EV.
Five of seven airlines historically to have an EV over $15bn went bankrupt (only Air France and Southwest have not yet and Southwest is an LCC).
The bankruptcy of JAL was the band-aid which helped All Nippon Airlines get to $17bn EV.
I think there is 50% down from here
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.