TOKYO (Reuters) – Japan’s largest airline ANA Holdings Inc 9202.T secured $ 3.8 billion in subordinated loans to bolster the funds it needs to survive a drop in air travel caused by COVID-19 travel restrictions, three people familiar with the deal said.
While the ANA has seen some rebound in demand for domestic flights, aided 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 that, like other carriers, ANA burns money to keep jets grounded or flying with too few passengers. In the three months to June 30, ANA reported an operating loss of 159 billion yen ($ 1.51 billion). It publishes its latest quarterly results on October 27.
Latest cash injection will include 130 billion yen each from Sumitomo Mitsui Financial Group Inc (SMFG) 8316.T and the state-backed Development Bank of Japan (DBJ), 60 billion yen from Mizuho Financial Group 8411.T, 50 billion yen from Mitsubishi UFJ Financial Group Inc 8306.T and 30 billion yen from Sumitomo Mitsui Trust Bank (SMTB) 8309.Tone of the people said, confirming an earlier Kyodo report.
The sources asked not to be identified as they are not authorized to speak to the media.
This is the first major subordinated loan program agreed in Japan since the start of the pandemic. Banks usually avoid this type of risky financing because other lenders get paid first if the borrower goes bankrupt.
ANA, SMFG, Mizuho and Mitsubishi UFJ declined to comment. DBJ and SMTB could not be reached immediately.
After a first round of borrowing, ANA had 517 billion yen in cash at the end of June. For ANA, like other airlines, the key to survival may be to ensure that these funds last as long as possible.
Last month, the International Air Transport Association (IATA) downgraded its forecast for this year, predicting global passenger traffic to drop by two-thirds after new outbreaks of the coronavirus further hurt demand.
ANA announced last week that it plans to offer voluntary layoffs to some workers, cut end-of-year bonuses and cut monthly wages. He also said he would allow some workers to take up to two years of unpaid leave.
Reporting by Takashi Umekawa, Maki Shiraki, Yoshif, umi Takemoto Sam Nussey and Yuki Nitta; Written by Tim Kelly; Editing by Louise Heavens and Tomasz Janowski