Japan’s top airlines are operating a majority of their domestic capacity even though COVID-19 has caused seats on flights to be left mostly empty, amid a lack of clear government directives on the functioning of transport infrastructure during the crisis.
ANA Holdings Inc and Japan Airlines Co Ltd (JAL), the nation’s two biggest airlines, have cut around 90% of international flights but left their domestic networks relatively intact, industry data showed. The two normally fly around 800 or more domestic flights daily.
They are currently flying around two-thirds of capacity with 10% of the usual demand, according to the airlines. That is despite Japan declaring a one-month state of emergency in major cities on April 7 that was expanded Thursday to include the entire country.
The move is set to add further financial strain on the Japanese carriers. Their peers in India, Thailand and the Philippines have grounded all domestic flights under government orders, while those in Australia and New Zealand are flying less than 5% of their normal schedules due to travel restrictions and reduced demand.
Japan has not restricted domestic travel, and authorities in Tokyo and other big cities are only requesting that people stay in and asking bars and restaurants to temporarily close without penalties if they don’t.
“The government has declared an emergency, but hasn’t asked the airlines to reduce flights — rather they want to maintain the transport infrastructure,” said a person familiar with operations at the airlines, who was not authorized to talk to media.
“Some planes are flying with fewer than 10 passengers, but we feel we need to keep that transport infrastructure,” the person added.
An official at the Japan Civil Aviation Bureau, which oversees the carriers, described it as “business as usual”, with the airlines setting schedules based on business conditions. The government only requires them to offer refunds or new bookings to passengers affected by cancellations, he said.
Neither carrier is government owned but ties with regulators are close, with officials and politicians willing to extend financial help in troubled times to support a domestic aviation network that connects islands stretching across almost 3,000 kilometres (1,864 miles). In a stimulus package equivalent to a fifth of the nation’s annual GDP, Prime Minister Shinzo Abe’s government has promised financial support for the carriers, although it has yet to say how much.
The Scheduled Airlines Association of Japan, which represents ANA, JAL and 17 others, estimates that the pandemic will cost its members some ¥500 billion ($4.64 billion) in lost revenue by the end of May.
Over a year that deficit could balloon to ¥2 trillion, the industry lobby group predicts.
ANA has asked commercial lenders and the state-run Development Bank of Japan for ¥400 billion in aid, as it burns through cash during the crisis.
“I expect current cuts to operations to continue,” said a second airline industry source familiar with the matter, asking not to be identified. If the coronavirus downturn lasts a year, ANA will need at least ¥1.3 trillion, the source said.
An ANA spokeswoman said the carrier would consider further cuts to domestic flights, but because it was a necessary form of transportation it would continue to cooperate in maintaining basic services.
“The crucial question is whether there is going to be at least a partial recovery in operations by the summer,” said Kazuma Ogino, a credit analyst at Nomura Securities in Tokyo.
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