Japan's ANA airline secures $3.8 bn loan as Covid-19 travel slump bites

Japan's biggest airline ANA Holdings Inc 9202.T has secured $3.8 billion in subordinated loans to bolster funds it needs to survive a slump in air travel caused by Covid-19 travel restrictions, three people 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.

That means ANA like other carriers is burning through cash to maintain jets that are either 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 releases its latest quarterly results on Oct. 27.

The 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.T, one of the people said, confirming an earlier Kyodo report.

The sources asked not to be identified because they are not authorised to talk to the media.

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

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

Following an early 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 make those funds last as long as possible.

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

ANA last week said it planned to offer voluntary redundancies to some workers, cut end of year bonuses and reduce monthly salaries. It also said it will allow some workers to take up to two years off without pay.