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Japan Airlines to raise up to $1.6bn from share sale

New shares up to 30% of total could be issued, shoring up finances amid pandemic

This fiscal year, Japan Airlines expects to fall into the red for the first time since it relisted on the Tokyo Stock Exchange in 2012, as travel markets have been hit by the pandemic.   © Reuters

TOKYO -- Japan Airlines said on Friday that it planned to raise up to 168 billion yen ($1.6 billion) through a public offering, followed by a third-party allotment, in a bid to raise capital after the coronavirus pandemic has caused a huge drop in demand for air transport.

Through its equity finance plan, in which the company will issue new shares, Japan Airlines aims to strengthen its financial position while also investing in more energy-efficient aircraft in preparation for when demand picks up again.

The company will issue up to 100 million new shares, accounting for 30% of its current outstanding stock of 337 million shares. The public offering will be be open to Japanese as well as overseas investors.

While 100 billion yen of the capital will be used for investments, the remaining 68 billion yen will be used for the repayment of interest-bearing debt.

The airline plans to spend 80 billion yen on aircraft from Europe's Airbus, with more fuel-efficient planes that emit less carbon dioxide. It also plans to put 15 billion yen toward an investment and loan plan for the company's low-cost carrier arm, which is expected to see a rebound in demand when travel markets recover.

Japan Airlines will need 30 billion yen this fiscal year to redeem bonds and for the repayment of borrowings, as well as 100 billion yen over the following two fiscal years, with part of the raised funds going to these purposes.

The Japanese company forecasts a net loss of between 240 billion yen and 270 billion yen for the current fiscal year through March 2021 and expects to fall into the red for the first time since it relisted on the Tokyo Stock Exchange in 2012.

Passenger numbers continue to fall, especially on international flights, as the pandemic continues to spread in parts of the world.

With many companies in the transportation industry, including airlines, struggling during the pandemic and posting losses, it is possible that more of them will choose the equity finance route.

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