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Moody’s Investors Service Inc. said Tuesday it may downgrade the Baa3 senior unsecured long-term rating of All Nippon Airways in response to the Fair Trade Commission’s decision to approve the merger of Japan Airlines and Japan Air System.

“Moody’s is concerned that ANA’s earnings and cash flow may face downward pressure due to severe price competition from the JAL and JAS group in the domestic market, as well as the more difficult business environment facing ANA due to the weak Japanese economy,” the U.S. credit-rating agency said.

On April 26, the FTC gave the go-ahead to the integration of JAL and JAS in view of the revisions the two had made to their original amalgamation plan.

With the approval, ANA and the JAL-JAS group will be the two main competitors in the domestic civil aviation market.

Moody’s said that in reviewing the ANA rating, it will focus on ANA’s strategy to deal with the merger as well as the speed of the company’s implementation of its cost-cutting and debt-reduction plans.

It will also assess ANA’s “ability to protect its relatively competitive position vis-a-vis JAL and JAS in the domestic market,” it said.

JAL and JAS plan to set up a holding company on Oct. 2 and merge their operations into three group firms by the spring of 2004.

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