ANA To Sell Shares To Upgrade Jets, Seeks Y30bn Cost Cuts

TOKYO (Dow Jones)–All Nippon Airways Co. Wednesday announced several measures to deal with faltering travel demand, including its first equity financing in three years to promote the purchase of more fuel-efficient aircraft and Y30 billion in cost cuts for this fiscal year.

“Results for the first quarter are…expected to be harsher than the fourth quarter of FY2008,” the company said in a release. As a result, it estimates its revenue for the current fiscal year will be Y30 billion short of its initial expectation.

The airline attributed the weaker revenue to sluggish demand for business trips amid the economic slowdown and a general decline in travel because of the outbreak of swine flu.

The Tokyo-based carrier is planning to make greater use of fuel-efficient jets, increasing orders for Boeing’s 787 Dreamliner jet to 55 from 50, among its plans to buy new passenger jets.

To pay for the new airplanes, ANA will issue up to 575 million shares, which would be worth Y182 billion based on its Wednesday closing share price.

The issuance will boost its outstanding shares by up to 29% to 2.525 billion from 1.950 billion now.

Bigger local rival Japan Airlines Corp. is also considering raising money, in the form of loans from the government-backed Development Bank of Japan and other banks.

Both airlines suffered losses in the last fiscal year on declining demand for travel, while rebounding oil prices are also emerging as another concern.

ANA’s new share issue is another headache for the Tokyo stock market, which is facing a surge in the supply of new shares.

Earlier Wednesday, Mizuho Financial Group Inc. said Wednesday it aims to raise about Y600 billion, or $6.2 billion, in new capital through share issuance. Loss-making chipmaker Toshiba Corp. (6502) also plans to issue new shares to raise up to Y317 billion. The Nikkei reported earlier in the day Orix Corp. is planning to offer about Y100 billion in shares.

ANA will issue 537.5 million new shares and an additional offering of 37.5 million shares under an overallotment arrangement in the event of exceptional demand. Half of the total will be offered in Japan and the remainder overseas.

The company will set the share offering price between July 13-15.

While upgrading its fleet, ANA aims to slash costs by Y30 billion in the current fiscal year by lowering labor costs, and reducing and halting routes with declining demand.

ANA, which is the launch customer for Boeing’s 787 Dreamliner, said it hadn’t heard from the U.S. aircraft maker on when it might receive delivery of the first aircraft, adding that it expects no major impact on its business plan from the latest delay as long as it isn’t substantial.

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