Japan's Two Major Airlines Collapse Under COVID-19 Shock... Net Losses and Restructuring Ensue

JAL Forecasts 2.5 Trillion Won Net Loss
ANA Plans Restructuring of Over 3,500 Employees

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Japan's two major airlines have been hit hard by the COVID-19 pandemic.

According to the Nihon Keizai Shimbun on the 27th, Japan Airlines (JAL) is expected to record a net loss of 230 billion yen (approximately 2.4793 trillion KRW) for the fiscal year 2020 (April 2020 to March 2021) based on consolidated financial statements.

In the fiscal year 2019, Japan Airlines recorded a net profit of 53.4 billion yen (approximately 575.7 billion KRW).

This year's expected loss exceeds the average market forecast of 218.8 billion yen calculated by Nikkei.

Since Japan Airlines will apply International Financial Reporting Standards (IFRS) from this year, some argue that a simple comparison with past performance is not appropriate. However, this company is expected to record its first annual net loss since it was delisted in February 2010 due to financial difficulties and relisted in 2012.

The Nihon Keizai Shimbun predicted that although air travel demand, which was severely contracted due to COVID-19, is gradually recovering mainly in domestic routes, and the deficit in the third quarter of this year is showing a tendency to decrease compared to the second quarter, it will still take considerable time before turning profitable.

In urgent need, Japan Airlines is considering raising funds amounting to several hundred billion yen from banks.

ANA Holdings, which oversees airlines including All Nippon Airways (ANA), has decided to carry out restructuring by reducing about 3,500 group employees by 2022.

In addition to retirement, voluntary resignation, and suspension of new hires, they are also promoting transferring employees to other companies and plan to sell about 30 aircraft, including large aircraft with low operational efficiency.