Reuters | Tokyo

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Japan’s ANA Holdings Inc on Tuesday said it will retire more than a tenth of its mostly Boeing Co fleet and delay two aircraft orders to help rein in costs and survive a collapse in air travel caused by coronavirus travel restrictions.

Forecasting a record operating loss of 505 billion yen ($4.82 billion) for the year to March 31, Japan’s biggest airline said it will also temporarily transfer more than 400 workers to other companies and ask those remaining to accept pay cuts or unpaid leave.

ANA, like other airlines, is burning through cash to keep jets flying albeit with too few passengers. Though demand for domestic flights has recovered to about half of last year’s level, helped by government-subsidised travel, it is flying only a fraction of its usual international schedule.

After initially halting nearly all entry to prevent the spread of the novel coronavirus, Japan recently began allowing in business travellers and foreign residents on condition they agree to quarantine for two weeks. Most overseas tourists are still banned.

As a result, ANA said it would retire 35 planes, 28 of them early, including 22 Boeing 777 widebodies and delay delivery of one 777 and one Airbus SE A380 superjumbo. That will reduce its fleet by a net 33 aircraft to 276 planes.

To ensure it has enough cash to survive the downturn, the airline on Tuesday also confirmed it had secured $3.8 billion in subordinated loans from state-backed and private lenders.

Its cost-cutting response follows job cuts and early aircraft retirements at other large Asian carriers including Singapore Airlines Ltd, Cathay Pacific Airways Ltd and Qantas Airways Ltd - all suffering from border restrictions that have curbed travel.

ANA deserves praise for trimming costs, but its recovery plan also relies on a rebound in travel demand, including on international routes, that may not materialize, said Ryota Himeno, an analyst at JP Morgan Securities Japan.

“While praying for demand to return it must work on deepening cost cuts laying out a business strategy for when it doesn’t,” he said.