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Editorial: Structural reforms crucial for airlines to get through these turbulent times

  • October 29, 2020
  • , The Japan News , 9:55 p.m.
  • English Press

Airlines are facing an increasingly severe business environment, but it is crucial to protect air transport infrastructure, which connects countries around the world. Each airline should make whatever reforms are necessary to ensure they continue operating.

 

ANA Holdings Inc., which owns All Nippon Airways, has announced that it expects to post a net loss of ¥510 billion in its consolidated results for the business year ending in March 2021. This will be the biggest loss in the company’s history.

 

ANA also has announced cost-cutting measures and compiled a structural reform plan.

 

Travel restrictions imposed by many countries due to the spread of the novel coronavirus have resulted in flights on international routes being slashed by 90% compared with the previous year. This situation is ongoing. Japan Airlines is likewise expected to book a loss of more than ¥200 billion in the period through March 2021.

 

A full-fledged recovery of international air travel seems unlikely for the foreseeable future. Devoted efforts to making every possible structural reform will be needed.

 

ANA plans to cut the monthly salary of all employees and withhold winter bonuses. This will reduce a regular employee’s annual income by 30%. The company also will lower personnel costs through steps including a hiring freeze and temporarily relocating at least 400 workers to companies outside the group.

 

The company apparently plans to safeguard the jobs of its employees. ANA should use every means at its disposal to achieve this, such as using the central government’s employment adjustment subsidy program that covers some leave allowances paid by the company.

 

ANA also is reducing fixed costs by consolidating flight routes and selling aircraft.

 

Reforms that are more proactive, such as carving out new business opportunities, also will be vital.

 

ANA will launch a business that collects customer data accumulated through its Mileage Club and other sources and sells travel products online. ANA will start international flights under a new low-cost carrier brand. The airline will use foreign pilots and flexibly review its hiring practices.

 

JAL reportedly will roll out a project in which its flight attendants develop specialty goods in regional areas and assist campaigns to attract tourists.

 

Such steps are important, but in these challenging times each company’s management efforts alone might not be enough. Some airlines overseas, including Thai Airways International, have gone bankrupt. Many countries have opted to provide airlines with public support in the form of subsidies or direct investment.

 

Flight routes are part of the infrastructure that allows people to freely move between places. They also will be essential for enabling the economic recovery to progress smoothly after the coronavirus pandemic has been brought under control.

 

Although both ANA and JAL will have no cash flow problems for the time being, the government should consider boosting assistance available to them to brace for the impact of the pandemic dragging on.

 

Government-affiliated financial institutions have already extended crisis response loans, and some usage fees at state-managed airports have been cut.

 

Lowering or removing fuel taxes also could be an option. The government should concentrate on supporting efforts each airline is making to help their own cause.

 

— The original Japanese article appeared in The Yomiuri Shimbun on Oct. 29, 2020.

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