ANA secures ¥400 bil in loans as COVID travel slump bites

Japan's biggest airline, ANA Holdings Inc, has secured 400 billion yen ($3.8 billion) in subordinated loans to bolster funds it needs to survive a slump in flights caused by COVID-19 travel restrictions, three persons with knowledge of the deal said.

While ANA has seen some rebound in domestic flight demand, helped by a government travel campaign, bookings remain below last year’s levels, with international air traffic still only a fraction of what it was before the pandemic.

This means ANA like other carriers is burning through cash to keep jets that are either grounded or flying with too little passengers. In the 90 days to June 30, ANA reported an operating lack of 159 billion yen. It releases its latest quarterly results on Oct 27.

The most recent cash injection includes 130 billion yen each from Sumitomo Mitsui Financial Group Inc (SMFG) and the state-backed Development Bank of Japan (DBJ), 60 billion yen from Mizuho Financial Group, 50 billion yen from Mitsubishi UFJ Financial Group Inc, and 30 billion yen from Sumitomo Mitsui Trust Bank (SMTB), among the people, said, confirming a youthful Kyodo report.

It is the first major subordinated loan package agreed in Japan since the start of the pandemic. Banks usually avoid such risky financing because other lenders are paid first if the borrower is out of business.

ANA, SMFG, Mizuho, and Mitsubishi UFJ declined to comment. The DBJ and SMTB cannot immediately be reached.

Following an early on a round of borrowing, ANA had 517 billion yen in cash towards the end of June. For ANA, like other airlines, the main element of survival may be to make those funds last so long as possible.

The International Air Transport Association (IATA) last month downgraded its forecast for this year, predicting global passenger traffic will stop by two thirds after fresh coronavirus outbreaks further hurt demand.

ANA the other day said it planned to provide voluntary redundancies to some workers, cut end of year bonuses, and reduce monthly salaries. In addition, it said it will allow some personnel to take up to 2 yrs off without pay.