ANA Holdings Inc. has forecast its biggest-ever operating loss of ¥505 billion ($4.8 billion) for the fiscal year through March 2021, as the global airline becomes the latest to face an existential threat to its business due to the pandemic.
Along with its quarterly results, the carrier also unveiled a restructuring plan. ANA will target ¥150 billion in cost reductions in the current fiscal year, dispatch hundreds of employees to other companies and sell aircraft.
Analysts had been projecting, on average, an operating loss of ¥376 billion for the year, according to estimates compiled by Bloomberg.
The $838 billion global airline industry is set to see revenue slashed by half this year, with carriers cutting jobs and securing funding to ride out the crisis.
ANA, Japan’s largest carrier, is suffering from a steep drop in domestic and international passenger traffic, and is planning to secure about ¥400 billion in subordinated loans to keep operations afloat.
ANA Holdings President Shinya Katanozaka said the earnings results were “very serious,” adding that the group would take bold steps to turn around its businesses.
“We will do everything we can to return to the black in the next business year,” he said.
Under the restructuring plan, ANA said it would retire 35 planes — 28 of them early — including 22 Boeing Co 777 widebodies, and delay delivery of one 777 and one Airbus SE A380 superjumbo.
It also plans to seek voluntary redundancies and transfer over 400 employees to hotels, call centers and other companies to reduce costs.
“Both JAL and ANA hold enough liquidity to last at least through this fiscal year,” said Bloomberg Intelligence analyst James Teo. More could be done to rationalize ANA’S fleet to better match reduced demand, and the airline could consider further revising the salary structures of pilots and staff, he said.
ANA shares fell 3.2% before the results and restructuring plan were released. The stock is down 37% this year.
ANA also issued an outlook for ¥740 billion in revenue for the fiscal year through March, compared with analysts’ average prediction for ¥926 billion.
The carrier is set to receive the subordinated loans from five lenders, including Sumitomo Mitsui Financial Group, Mizuho Financial Group and the government-backed Development Bank of Japan. Nikkei reported last month that ANA was considering raising ¥200 billion via a public share offering.
For the latest quarter, ANA reported an operating loss of ¥122 billion, compared with average estimates of a ¥115 billion loss, on revenue of ¥170 billion.
Japan, which delayed by a year its plan to hold the Olympics this summer, had prepared for a massive tourism boost, building hotels and redeveloping urban areas.
But global passenger traffic won’t return to pre-pandemic levels until 2024, according to the International Air Transport Association. Overseas visitors to Japan fell 99.4% in September from a year earlier as the country largely kept its borders shut.
The Go To campaign aimed at supporting domestic travel demand has helped, but local demand is far from fully recovered. ANA and Japan Airlines Co. are both forecasting domestic passengers to drop by about 50% this month.
The government has taken steps to support the industry, including landing fee measures and access to funding through state financial institutions, Chief Cabinet Secretary Katsunobu Kato said earlier this month.
Although events such as natural disasters and epidemics are inevitable for the aviation industry, carriers probably didn’t expect the impact of COVID-19 to be this big, said Shunsuke Oshida, a credit analyst at Manulife Asset Management.
United Airlines Holdings Inc. and Delta Air Lines Inc. are among airlines that have posted steep losses, while Cathay Pacific Airways Ltd. and Singapore Airlines Ltd. are cutting thousands of jobs.
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