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By Tim Kelly
TOKYO (Reuters) – Japan’s largest airline ANA has turned to billions of dollars in loans and a government tourism crusade to triumph over the airline crisis and may simply credit the accounting regulations on depreciation of aircraft.
Like other airlines, ANA spent cash to keep planes on the ground or flying with very few passengers due to the coronavirus pandemic, leading to an operational loss of 159 billion yen ($1. 51 billion) for the april-June quarter.
Sources told Reuters Wednesday that ANA Holdings Inc had secured $3. 8 billion in subordinate loans from state-backed lenders.
He will have raised $13. 29 billion in debt to deal with the consequences of the coronavirus, said Yasuhito Tsuchiya, senior analyst at Mitsubishi UFJ Morgan Stanley Securities.
“They seem to have enough to survive,” said Tsuchiya, who hopes the airline will be on track for a record operating loss of about 1 billion yen for the entire year ending March 31.
The airline cuts prices through layoffs and pay cuts. Along with rival Japan Airlines Co Ltd (JAL), it also receives government assistance, adding an exemption on airport landing fees, as Tokyo considers airlines essential to stay in Japan, a 3,000-kilometer archipelago that stretches across East Asia, connected.
ANA, which reported a negative cash flow from operations of 135 billion yen by April-June, said it did not expect its outside air to fully recover until 2024.
It has more than three hundred aircraft, adding Airbus A380 super jumbos and two-aisle aircraft such as the Boeing 787 Dreamliners, and owns two-thirds of its fleet while renting the rest.
At the end of June, ANA said its aircraft were worth 1. 14 trillion yen ($10. 83 billion), virtually unchanged from last year, however, analysts are probably not a real mirror image of their existing market value.
Keeping planes on the floor or underutilized can be expensive due to parking and maintenance charges, which charged ANA 177 billion yen last year.
The depreciation of some of them may simply increase the loss of profits, but would allow the carrier to pay depreciation fees to increase its long-term profits.
However, analysts say ANA can simply take advantage of foreign aviation accounting regulations that do not require it to re-evaluate aircraft to reflect market prices, allowing it to avoid painful depreciation and a desire to raise capital.
“ANA has too many big planes. The loss of calculated in the existing market would be huge, so there is no way to sell them,” said Hajime Tozaki, professor of economics at JF Oberlin University in Tokyo and former JAL employee.
The IBA aviation representative estimated this month that the number of aircraft owned by the airline had fallen to $ 60 billion, 40% less than it would be if supply and demand were balanced.
“Finding buyers right now at any value is quite difficult, with the exception of lenders finding reasonable bargains,” said Richard Aboulafia, aerospace analyst at Teal Group.
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Tsuchiya stated that ANA and JAL had the merit of a giant domestic market with little competition to mitigate the losses lacking from other primary Asian airlines such as Singapore Airlines Ltd and Cathay Pacific Airways Ltd.
ANA, the ninth largest airline in the world this summer in terms of seating capacity, compared to fifteenth a year ago, according to the knowledge company OAG, due to the relative strength of this domestic market.
Prior to the pandemic, ANA generated more than part of its profits on domestic flights and called for a bounced thank you to the government crusade “Go To Travel” introduced in July to reactivate domestic tourism, which gives to pay up part of the travel charge.
Domestic reserves in October accounted for about 50% of last year’s bookings, ANA spokeswoman said, while the airline said foreign traffic reached 5% of the titles registered in 2019.
ANA, expected to liquidate around two hundred billion yen of debt next year, is expected to publish its effects for the July-September quarter on October 27.
The Japanese government on Friday announced more aid to carriers, saying it would reduce airport landing fares through a 45% record on all domestic flights during seven February months.
“The government wants JAL and ANA to be national operators,” Tozaki said.
(Information via Tim Kelly; additional information via Ami Miyazaki and Takashi Umekawa in Tokyo; edited through Jamie Freed and Susan Fenton)