Coronavirus

EDITORIAL | Airlines Badly Hurt by Pandemic Must Have Public Support to Survive

Published

4 years ago

November 9, 2020

Japan’s airline companies, like those abroad, have suffered gravely because of the coronavirus pandemic. All Nippon Airways Holdings Inc. (ANAHD), owner of All Nippon Airways Co. (ANA), has projected the worst loss in the company’s history, based on consolidated financial statements for the business year through March 2021. Its rival flag carrier, Japan Airlines (JAL), is expected to register more than 200 billion yen ($1.935 billion USD) in net loss for the 2020 business year.

Of course, the two major airlines must first rebuild their management models to improve business efficiency. Both ANA and JAL have cost reduction plans and have been proceeding with steps such as temporary transfer of employees to other companies. They should also do their best to consolidate air routes, or abolish them when warranted.

However, there is yet no end in sight to the COVID-19 pandemic. Globally, airlines are facing severe business conditions, and some governments are extending support for their struggling carriers.

While Japanese airlines must take steps to help themselves, so too should the Japanese government consider strengthening its support for the domestic aviation industry from the standpoint of keeping Japan networked with the rest of the world.

As COVID-19 has continued to ravage the globe, all countries have placed restrictions on the movement of people across their borders, leading to a drastic drop in air passenger traffic, especially on international air routes. This in turn has seriously affected the airlines.

Based on consolidated financial statements, ANAHD is to post a net loss bottoming out at ￥510 billion JPY ($4.8 billion USD) for the current fiscal year. JAL will also post its greatest loss, up to ￥270 billion JPY ($2.61 billion USD).

We want to see the two flagship airlines do their utmost to turn around their operations by doing more to boost efficiency, in addition to the sale of surplus equipment.

Taking account of the dire situation, both ANA and JAL have temporarily dispatched hundreds of employees to assignments outside their parent company, while also slashing bonuses and salaries. The temporary transfer of employees to other companies is aimed at cutting costs while protecting employment. Careful consideration should be paid to the contents of the work assigned to the dispatched employees and the companies that take them in.

Even with these measures, it is still unclear whether the aviation industry will be able to ride out the strong global headwinds on its own. While domestic flight demand is recovering due to the government-funded “Go To” Travel campaign, international demand will clearly take some time to come back. That is why the governments of such countries as Germany and Thailand have already put in place high-powered governmental measures to support their airlines.

The Japanese government has taken some supportive steps, such as partial exemption of aircraft landing and parking fees, but more drastic measures are indispensable in the face of the prolonged COVID-19 crisis. To ramp up financial resilience, it is necessary for the government to consider a framework for the capital injection of public funds.

The COVID-19 pandemic has dealt a severe blow to domestic industries. Under the circumstances, the Japanese people deserve to understand the need for the use of public funds to keep the airlines afloat. The courtesy of a respectful explanation by the government will be a must.

(Read the editorial here in its original Japanese.)

Author: Editorial Board, The Sankei Shimbun