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ANA secures $8.8bn in credit, easing cash flow concerns

Airline expects slow recovery to begin around August

Aviation analysts expect further financial countermeasures could be still be needed to help steady Japan's biggest carrier. (Photo by Akira Kodaka)

TOKYO -- Japan's ANA Holdings said Tuesday that it had secured 950 billion yen ($8.8 billion) in loans to help it weather the coronavirus crisis rocking the global aviation industry.

"There is absolutely no concern on cash flow for a while," ANA executive vice president Ichiro Fukuzawa told reporters at an online news conference. "We have been preparing for unexpected circumstances with conservative assumptions."

ANA, which had nearly 240 billion yen in cash and securities at the end of March, reached an agreement Tuesday for an additional 350 billion yen credit line from private-sector banks, in addition to an existing 150 billion yen credit line.

The airline, which is losing nearly 100 billion yen monthly, had previously secured a 100 billion yen loan from banks, and is about to secure 350 billion yen worth of loans from a public sector lender to help it withstand the unprecedented crisis.

Still, aviation analysts expect further financial countermeasures could be needed to help steady Japan's biggest carrier with the global pandemic likely to wipe out demand for the rest of the year.

"Airlines gain a majority of their profits at the first half of the fiscal year," said Hajime Tozaki, a professor at Japan's J.F. Oberlin University and an aviation industry expert. "This year's Golden Week is catastrophic, and if the pandemic continues until summer, the situation will be very tough for ANA," he said.

ANA's load factor has been considerably lower than its peer Japan Airlines, due to the rapid expansion of routes, Tozaki added, saying extra cost-cutting measures or additional financing might be necessary for the carrier.

The International Air Transport Association estimated earlier this month that Asia-Pacific airline passenger revenue will fall by $113 billion in 2020 compared to last year, with global passenger revenue set to drop by 55% to just $314 billion.

ANA recorded a net profit of 27 billion yen for the fiscal year ended in March 31, down 75% compared to the previous year after it recorded 58 billion yen loss in the three months to the end of March due to the massive drop in demand.

Currently operating only 10% of planned international flights and 30% of domestic flights, ANA has also slashed dividends to zero from the planned 75 yen per share.

The airline will only operate 15% of all scheduled domestic flights during Golden Week from Wednesday through to May 6, traditionally one of Japan's busiest annual holiday periods.

While ANA has suspended its guidance on earnings for this fiscal year due to uncertainty around when the coronavirus crisis might end, Fukuzawa said that the company assumed that a gradual recovery would start to take effect by August.

With passenger revenue expected to return to up 70% of last year's levels by March 2021, Fukuzawa said international flight recovery would be very slow. "We have to reconsider a milder expansion strategy for international flights," he said.

ANA has already put 35,000 employees on furlough, but will increase that number to 42,000 employees by the end of May, Fukuzawa added, emphasising that workers would still keep their jobs.

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