Japanese airlines brace for further restructuring amid scarce aid

Oct 10, 2020 | News On Japan

Oct 10, 2020 (Nikkei) - Pressures for public aid are mounting in the Japanese aviation market, with no rebound in sight for air travel, as full-service and budget airlines are preparing further cost-cutting measures that will hit their employees and routes.

Public funds and state-guaranteed loans will be vital if Japan's full-service carriers are to make it through to early next year, some industry experts say, noting that airlines in other Asian nations are restructuring with government help.

All Nippon Airways has decided to suspend winter bonuses for all of its nearly 15,000 employees -- the first time since 1962 when the company started to track records. ANA was founded in 1952.

"I feel very sorry, as the decision has a big impact on your life," parent company ANA Holdings CEO Shinya Katanozaka stressed in his statement to group employees. The winter bonuses, together with summer bonuses, account for 27% of annual income for workers at large Japanese companies with more than 5,000 employees, according to the National Tax Agency.

ANA also made a proposal to its labor union for voluntary retirement. Japan's largest carrier will add extra compensation to its existing voluntary retirement system, which it last did in 2013 for fewer than 50 employees.

Since March, ANA Holdings has been leveraging the government's employment adjustment subsidy to furlough 40,000 workers. It has also secured loans from banks and is now considering a public offering.

The government has not offered airline bailouts, except for loans through government-backed bank and the employment adjustment subsidy available for many industries. Elsewhere in Asia, public aid has been offered to airlines. Singapore Airlines received 15 billion Singapore dollars ($10.8 billion) from a state-run investment fund, while Hong Kong's Cathay Pacific Airways also received a government aid package consisting of the issuance of preferred shares and bridge loans.

Unlike these countries and regions, Japan's domestic air market is seeing some light at the end of the tunnel. However, experts say further support from the government will be necessary for the survival of the Japanese industry.

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