ANA to cut workforce by 9,000 in 5 years, 2nd yr of net loss likely

Oct 29, 2021 – 22:10 By Noriyuki Suzuki, KYODO NEWS

TOKYO – ANA Holdings Inc. said Friday it will slash around 9,000 employees within five years as the Japanese airline expects to remain in the red for the second straight year with a 100 billion yen ($880 million) net loss in fiscal 2021, underscoring the severity of the hit from the fallout of COVID-19.

In an attempt to lower fixed costs, the parent of All Nippon Airways Co. will reduce the workforce, mostly in Japan, including ground staff and flight attendants, to around 29,000 in fiscal 2025, down 20 percent from fiscal 2020, through retirement and by curbing new hiring.

Travel demand has not come back as quickly as anticipated, forcing ANA to revise downward its full-year earnings forecasts from a net profit of 3.5 billion yen despite its robust international cargo and cost-cutting efforts.

It posted a record net loss of 404.62 billion yen in the previous business year as travel demand evaporated due to the coronavirus pandemic.

“A full-fledged recovery has been delayed to a great extent,” ANA President and CEO Shinya Katanozaka said at a press briefing.

“Our business is very vulnerable to a pandemic. Manpower-saving is the key word,” he said of the planned workforce reduction of ANA. But the CEO dismissed the idea of layoffs.

ANA expects an operating loss of 125 billion yen, instead of an operating profit of 28 billion yen, with sales projected to rise 45.5 percent to 1.06 trillion yen in the year to March.

In the six months to September, ANA’s net loss shrank to 98.80 billion yen from 188.48 billion yen a year earlier. Its operating loss came to 116.01 billion yen, compared with a loss of 280.95 billion yen, as sales rose 47.7 percent to 431.13 billion yen.

“The loss in the first half is too big, and we do not expect to achieve (profitability) even if we try to make up for it in the second half,” Katanozaka said, adding that the airline must reach profitability in the next business year.

The number of passengers on domestic flights increased to 7.14 million from 4.67 million a year earlier, while the figure for international flights stood at 327,686, up from 193,827.

Despite the sluggish recovery, ANA continued to benefit from strong cargo demand as shipments of semiconductors and auto parts increased. Revenue in the international cargo segment hit a record high of 138.3 billion yen.

The pace of recovery is faster for domestic flights as cross-border travel restrictions remain.

Demand for domestic air travel was affected by a COVID-19 state of emergency that was in place for Tokyo, Osaka and other areas during the otherwise busy summer holiday season.

The Tokyo Olympics and Paralympics turned out to be a disappointment for airlines that had expected a bump in travel demand after foreign spectators were barred and the Summer Games were made mostly TV-only.

ANA expects demand for domestic flights to recover to 50 percent of what it was before the pandemic in the current quarter to December and to 85 percent at the end of March.

The corresponding figure for international flights is only 7 percent in the current quarter and 30 percent at the end of March.

Airlines were forced to burn through cash as the airline industry was hit hard by travel restrictions. ANA has been scrambling to ride out the crisis by slashing flights and reducing its fleet while securing necessary funds via subordinated loans from major Japanese banks.

Katanozaka dismissed concern about the worsening of fiscal health, saying there is no immediate need to raise capital. The capital adequacy ratio, which stood at 31.4 in fiscal 2020, fell to 26.0 percent.

With the end of the state of emergency in Japan, ANA has seen demand for domestic travel increasing since the beginning of October and progress in vaccinations should serve as a “tailwind” for the airline industry, Katanozaka said.

The recovery in the Japanese airline industry has been slower than in the United States where major carriers — American Airlines Group Inc., Delta Air Lines Inc. and United Airlines Holdings Inc. — all reported a net profit in the third quarter of 2021.

ANA’s domestic rival Japan Airlines Co. is scheduled to release its earnings results next week. After falling into the red in fiscal 2020 for the first time since its relisting in 2012, JAL has yet to release its earnings forecasts for the current year due to uncertainty.