Japan's All Nippon Airways (ANA) has announced that it will retire more than 10% of its aircraft fleet and will delay two aircraft orders in order to limit expenses and survive a collapse in both its domestic and international operations as a result of the global Covid-19 pandemic and restrictions on travel.
ANA announced that it is forecasting a $4.8 billion USD loss for its current operations year of April 1, 2020 to March 31, 2021. It also announced that it plans transfer more than 400 workers to other companies and will also ask remaining employees to accept pay cuts or unpaid leave.
Like airlines across the globe, ANA is burning through cash to keep jets flying, even if they have very few paying passengers. While the Japanese government has helped the airlines situation by subsidizing travel, domestic flights are at less than 50% of last years capacity and international flights are estimated to be at only 15% of the capacity as previous years.
After initially halting nearly all entry to prevent the spread of the novel coronavirus,
Japan initially halted all international entry into the country to prevent the spread of the Covid-19 virus, but has been slowly opening up to selected countries and is allowing foreign residents and business travellers back into the country on the condition that they agree to a mandatory two-week quarantine.
As a result of its projected losses, ANA said it would retire 35 of its aircraft including 28 that will be retiring early, including 22 Boeing 777 wide body aircraft. Additionally, the airline will delay the delivery of one 777 airplane and one Airbus SE A380 superjumbo jet. The retirement of aircraft and delivery delays will reduce ANA’s aircraft fleet by 33 aircraft to 276 planes.
ANA also announced that it has secured $3.8 billion USD in subordinated loans from state-backed and private lenders to ensure that the company has enough cash to survive the current downturn.
ANA’s cost-cutting follows job cuts and early aircraft retirements at other large Asian carriers including Cathay Pacific Airways, Quantas Airways and Singapore Airlines which are all suffering from similar travel restrictions due to the Covid-19 pandemic.
ANA say’s that based upon different scenarios that expects that it will take a minimum of two-years for domestic travel to recover and that it will take three-years for international travel to return to pre-Covid levels.
Even when international travel recovers, ANA says that it expects passenger composition to change with fewer business travelers flying and more leisure passengers flying. This change in market composition will also have long-term financial implications for the airline since business travelers are its most profitable segment.
To adapt to the changes in market composition, ANA said it is considering creating a new a low-cost airline brand in 2022 that would fly routes between Japan and Southeast Asia and Oceania and that it will use Boeing 787 Dreamliners that will allow for 300+ passenger seating. Since there are many airlines flying from their home countries to Japan, whether a new low-cost airline can be launched remains to be seen and ANA says that no “firm” decision will be made until the summer of 2021 at the earliest.