Japan Airlines Co. said Friday it will raise around ¥300 billion ($2.7 billion) via a combination of subordinated loans and bonds to bolster its financial standing as the fallout from the coronavirus pandemic drags on.
The funds will also be used to introduce Airbus 350s that are considered more environmentally friendly and are expected to be the airline’s primary aircraft for international flights, JAL said.
The major airline will take out subordinated loans worth around ¥200 billion from Japanese megabanks — MUFG Bank, Mizuho Bank and Sumitomo Mitsui Banking Corp. — along with the state-backed Development Bank of Japan. Around ¥100 billion will be raised by issuing subordinated bonds.
JAL can avoid share dilution by using the methods. Subordinated loans can count partially as capital.
The financing plan is “not just a defensive move to secure enough funds on hand, but it is also an aggressive one in preparation for the post-coronavirus era,” Yuichiro Kito, a JAL official from the financial department, told an online briefing.
JAL is among global airlines hit hard by a slump in passenger numbers due to travel restrictions brought on by the pandemic.
Last November, JAL raised around ¥180 billion through a public stock offering and other means to survive the crisis and cover replacement costs for its fleet.
JAL has a relatively strong financial base compared to its global peers, with a capital adequacy ratio standing at 42.4% at the end of June.
In fiscal 2020, which ended in March, JAL posted its first net loss since its 2012 relisting following rehabilitation. In the three months to June, the airline logged a net loss of ¥57.92 billion, smaller than a year earlier, but returning to profitability remains a challenge as travel demand is expected to take more time to recover.
ANA Holdings Inc., the parent of All Nippon Airways Co., is also struggling to cope with the prolonged impact of the pandemic. Its capital adequacy ratio, a gauge of financial health, was at 26.6% at the end of June.
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