Why ANA and JAL Will Survive the Pandemic

  • NEWS
  • Updated to reflect new information.

    While the coronavirus pandemic has affected many countries and companies, the airline industry has been hit particularly hard. Multiple airlines around the world have been declaring bankruptcy and going through restructuring in order to survive.

    Japanese carriers Japan Airlines (JAL) and All Nippon Airways (ANA) are also facing problems.

    by Martin Danker

    ANA has for long been considered a strong airline because of its business structure and planning. ANA tends to be conservative when it comes to their route expansion, focusing on more profitable business routes. ANA has also recently invested in new products, introducing new first, business, and economy seats. JAL was also starting to invest, finally off the restrictions its bankruptcy and subsequent government saving agreement had entailed. Both airlines had huge airplane orders to renew their fleets, and JAL had even introduced new first, J-class, and economy domestic class seats after receiving their first A350 planes, being the first airline in the world to use the plane solely on domestic routes.

    As ANA and JAL continued to invest in its future, several factors started affecting the airline industry in Japan, from political conflicts with South Korea to various destructive typhoons; and finally, in a year when Japan was expecting to receive large numbers of foreign tourists, the COVID-19 pandemic struck.

    It has been reported that ANA will have a deficit of 510 billion yen ($4.87 billion) by the end of the Japanese fiscal year, which will be in March 2021. That will be ANA’s worst year on record. JAL, on the other hand, is expecting losses of 210 billion yen ($2 billion). While those numbers are better than ANA’s, it also represents the first time JAL is in the red after the airline emerged from bankruptcy in March 2011.

    ANA has also made headlines in Japan because of its restructuring, which includes decreasing the company’s total number of employees by 3,500 by 2023, retiring over 30 of its aircraft, and transferring about 400 employees to other companies like Toyota. Both ANA and JAL have also focused on their cargo business to see sources of income, but since both companies depend on passengers, the travel freeze the pandemic caused was inevitably going to affect them significantly.

    However, and despite the terrible odds, both ANA and JAL have the necessary things on their respective tables to state afloat and survive the crisis.

    To begin with, the Japanese government has stated their support for both the airline industry, recognizing that their importance to help Japan as a whole recover from the pandemic. Japan has numerous airlines besides JAL and ANA. Some of them are small regional airlines while other ones are small low-cost carriers. Just like the bigger ANA and JAL, these smaller airlines are also receiving loans from lenders that include the Development Bank of Japan, Mizuho Financial Group, and Sumitomo Mitsui Financial Group.

    While demand for international travel will take longer to recover, ANA and JAL benefit from an extensive domestic presence; and since domestic travel is expected to recover sooner, their numerous routes will benefit them. However, the airlines are still facing an uphill battle domestically as numbers are far from those seeing in previous years. Investors, though, remain confident that domestic demand will peak sooner than later.

    An example of this might be ANA’s Tokyo-Haneda to Ishigaki service, which will be increased to three times a day in December. As long as things remain under control, domestic demand could continue to increase. A problem, though, is that COVID-19 cases are once again going up; and some prefectures are even recording their biggest numbers ever. It remains to be seen whether the Japanese government will do something about this or if things will just to continue as normal.

    Additionally, ANA and JAL’s financial responsibility in the past few years has allowed the airlines to have enough liquidity to last through the end of the fiscal year, as Bloomberg’s intelligence analyst James Teo stated.

    What’s more, JAL is still eager to invest in its aircraft and businesses. Its newly launched low-cost carrier ZIPAIR had its first official passenger flight from Narita to Seoul on October 16, 2020; and ZIPAIR is still on track to launch its Bangkok and has dreams to fly to Honolulu. Domestically, JAL is also introducing a new J-Class seat for its 737-800 planes:

    While ANA is continuing to roll out its new Premium Class seats:

    As such, despite ANA’s and JAL’s very dire situation, with the right management and restructuring, both airlines have everything they need to survive, from a supporting government to a domestic market that is expected to recover.

    *Featured Image by ana.japan on Instagram