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MarketScreener Homepage  >  Equities  >  Tokyo Stock Exchange  >  Japan Airlines Co., Ltd.    9201   JP3705200008


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Analysis: Japan's ANA charts course through COVID with loans, domestic flights and accounting rules

10/16/2020 | 10:13am EST
A man works near an All Nippon Airways' (ANA) air plane parked at Haneda airport in Tokyo

TOKYO (Reuters) - Japan's biggest airline, ANA, has turned to billions of dollars in loans and a government tourism campaign to weather the slump in air travel and could take advantage of accounting rules to avoid aircraft writedowns.

Like other carriers, ANA has been burning through cash to maintain jets that are either grounded or flying with too few passengers during the coronavirus pandemic, pushing it to an operating loss of 159 billion yen ($1.51 billion) for the April-June quarter.

Sources told Reuters on Wednesday that ANA Holdings Inc has secured $3.8 billion in subordinated loans from state-backed and private lenders.

That means it will have raised $13.29 billion of debt to cope with the coronavirus fallout, says Yasuhito Tsuchiya, a senior analyst at Mitsubishi UFJ Morgan Stanley Securities.

"It looks like they will have enough to survive," said Tsuchiya, who forecasts the carrier is on course for a record operating loss of around 400 billion yen for the full year ending March 31.

The airline is slashing personnel costs through redundancies and pay cuts. Along with rival Japan Airlines Co Ltd (JAL), it is also getting government help including a waiver on airport landing fees, as Tokyo sees the carriers as crucial to keeping Japan, a 3,000-kilometre archipelago stretching along the edge of East Asia, connected.

ANA, which reported a negative cashflow from operations of 135 billion yen for April-June, has said it doesn't expect its international air travel to fully recover until 2024.

It has more than 300 planes, including Airbus A380 super jumbos and twin-aisle jets such as the Boeing 787 Dreamliners, and owns two thirds of its fleet while leasing the rest.

At the end of June ANA said its aircraft were worth 1.14 trillion yen ($10.83 billion), almost unchanged from the previous year, but analysts say that is probably not a true reflection of their current market value.

Keeping planes that are grounded or underutilised could prove expensive because of parking and maintenance fees, which last business year cost ANA 177 billion yen.

Writedowns on some of them could add to a bottom line loss, but would allow the carrier to reduce depreciation charges in a boost to future earnings.

Analysts, however, say ANA could instead take advantage of international aviation accounting rules that don't force it to revalue planes to reflect market prices, allowing it to avoid painful writedowns and the need to raise equity.

"ANA has too many big aircraft, The loss of value calculated on the current market, would be enormous, so there is no way they can sell them," said Hajime Tozaki, an economics professor at J.F. Oberlin University in Tokyo and a former JAL employee.

Aviation consultant IBA this month estimated the value of aircraft owned by airlines had dropped $60 billion, or 40% lower than what they would be if supply and demand were balanced.

"Finding buyers right now at any price is rather difficult, except lessors who are looking to find bargains at low prices," said Teal Group aerospace analyst Richard Aboulafia.


Tsuchiya said ANA and JAL have the advantage of a large domestic market with few competitors to help temper losses that other big Asian airlines like Singapore Airlines Ltd and Cathay Pacific Airways Ltd lack.

ANA was the world's ninth largest airline this summer based on seat capacity, up from 15th a year ago, according to data firm OAG, due to the relative strength of that home market.

Before the pandemic, ANA generated over half its revenue from domestic flights and demand has rebounded helped by the government's "Go To Travel" campaign launched in July to revive domestic tourism, which offers to pay up to half the cost of trips.

Domestic bookings in October are around 50% of last year, the ANA spokeswoman said, while the carrier has said international traffic is at 5% of levels seen in 2019.

ANA, which must repay around 200 billion yen in debt in the coming year, is due to release results for the July-September quarter on Oct. 27.

The Japanese government announced further help for carriers on Friday, saying it would reduce airport landing fees by a record 45% on all domestic flights for seven months through February.

"The government needs both JAL and ANA as national flag carriers," said Tozaki.

($1 = 105.2800 yen)

(Reporting by Tim Kelly; additional reporting by Ami Miyazaki and Takashi Umekawa in Tokyo; Editing by Jamie Freed and Susan Fenton)

By Tim Kelly

© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
AIRBUS SE -2.52% 87.73 Real-time Quote.-32.76%
ANA HOLDINGS INC. -0.54% 2585 End-of-day quote.-29.02%
CATHAY PACIFIC AIRWAYS LIMITED 0.41% 7.4 End-of-day quote.-35.76%
JAPAN AIRLINES CO., LTD. -7.99% 2038 End-of-day quote.-40.01%
MITSUBISHI UFJ FINANCIAL GROUP, INC. -0.36% 471.3 End-of-day quote.-20.55%
MIZUHO FINANCIAL GROUP, INC. -1.43% 1382 End-of-day quote.-17.88%
MORGAN STANLEY -3.15% 61.83 Delayed Quote.20.95%
SINGAPORE AIRLINES LIMITED -1.53% 4.51 End-of-day quote.-50.11%
SUMITOMO MITSUI FINANCIAL GROUP, INC. -0.41% 3191 End-of-day quote.-20.98%
SUMITOMO MITSUI TRUST HOLDINGS, INC. -0.06% 3254 End-of-day quote.-24.97%
THE BOEING COMPANY -2.67% 210.71 Delayed Quote.-33.54%
TSUCHIYA HOLDINGS CO., LTD. -1.52% 130 End-of-day quote.-42.48%
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Sales 2021 557 B 5 332 M 5 332 M
Net income 2021 -252 822 M -2 422 M -2 422 M
Net Debt 2021 229 B 2 194 M 2 194 M
P/E ratio 2021 -2,98x
Yield 2021 -
Capitalization 846 B 8 107 M 8 102 M
EV / Sales 2021 1,93x
EV / Sales 2022 0,96x
Nbr of Employees 35 653
Free-Float 95,5%
Duration : Period :
Japan Airlines Co., Ltd. Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends JAPAN AIRLINES CO., LTD.
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 10
Average target price 2 345,00 JPY
Last Close Price 1 977,00 JPY
Spread / Highest target 41,6%
Spread / Average Target 18,6%
Spread / Lowest Target -3,89%
EPS Revisions
Yuji Akasaka Executive President & Representative Director
Yoshiharu Ueki Chairman
Takahiro Abe Executive Officer & General Manager-Operations
Toshiki Oka Executive Officer & GM-IT Planning
Hideki Kikuyama Representative Director
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1st jan.Capitalization (M$)
JAPAN AIRLINES CO., LTD.-40.01%8 445
DELTA AIR LINES, INC.-29.79%26 079
AIR CHINA LIMITED-18.46%15 642