UPDATE 2-Japan Airlines deepens loss forecast as coronavirus infections surge

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TOKYO, Feb 1 (Reuters) - Japan Airlines (JAL) on Monday further cut its record full-year loss outlook as a fresh surge in coronavirus infections dampened a recovery in domestic travel that had been helping the airline weather the pandemic.

The 420 billion yen ($4 billion) loss it is predicting for the year to end March compares with a forecast loss of as much as 380 billion yen it predicted three months ago.

It was also deeper than an average 338.8 billion yen loss forecast by eight analysts polled by Refinitiv.

Like bigger local rival ANA Holdings, JAL saw domestic demand rebound in the final quarter of last year to around half of the previous year’s level, helped by government subsidies for air tickets and hotels.

A resurgence in coronavirus cases however forced authorities to halt their campaign to boost tourism and reinstate lockdowns in major cities.

On Monday the carrier said demand for domestic flights this month will likely drop to a fifth of last year’s level, less than a third of what it had predicted before the latest coronavirus wave.

International passenger numbers are still only about 5% of pre-pandemic levels.

One bright spot for JAL was strong demand for air cargo, including game consoles and autoparts. Rates on international routes are twice what they were a year ago, and the company expects air cargo sales this business year to jump by a third.

JAL so far has not cut salaries to cope with the travel slump, but has dispatched some worker to hotels and other companies to avoid laying them off.

In a bid to cut costs the carrier is also retiring 24 Boeing Co. 777 widebody aircraft.

In November JAL shored up its finances with a 183 billion yen stock offering equivalent to 30% of its existing shares.

But as the pandemic drags on, the carrier is expecting to burn through around 25 billion of cash a month this quarter, almost double the rate of the previous three months.

It expects to have 370 billion yen of cash on hand by March 31, compared with 455 billion at the end of 2020.

In the three months to Dec. 31 the airline posted an operating loss of 70.2 billion yen, compared with a 31.7 billion yen profit a year ago. That was worse than an estimated average 54.8 billion yen loss from three analysts surveyed by Refinitiv.

$1 = 104.6700 yen Reporting by Tim Kelly; Editing by Kim Coghill, Stephen Coates and Jan Harvey