Japan Airlines 'to file for bankruptcy and cut 15,600 jobs'

After weeks of confusion, latest reports suggest airline will become sixth-biggest bankruptcy in Japanese history.

Japan Airlines is to shed 15,600 jobs and shun a capital alliance with US carriers as part of restructuring plans that could see it file for bankruptcy as early as next week.

Reports in the Japanese media said that Asia's biggest airline would cut a third of its workforce over three years.

After weeks of mounting confusion over its future, it now appears that JAL will file for bankruptcy protection under Japan's corporate rehabilitation law.

In what would be the sixth-biggest bankruptcy in Japanese history, the state-backed turnaround group responsible for engineering JAL's revival would inject ¥300bn (£2bn) in new capital, provided the airline filed for bankruptcy and its financial backers agreed to waive ¥350bn in debts.

JAL's major creditors, which include the state-owned Development Bank of Japan and the "megabank" Mitsubishi UFJ financial group, were owed ¥429bn at the end of March.

Speculation is mounting that JAL's shares will be de-listed, although officials at the Enterprise Turnaround Initiative Corporation [ETIC] say they have yet to reach a decision.

According to Kyodo News, the ETIC will also guarantee more than ¥470bn to cover fuel and other commercial transactions after JAL goes into administration.  The body reportedly wants JAL to reject rival offers of fresh investment from Delta and American Airlines, as it believes a new capital alliance could complicate the restructuring plans.

Delta, the world's biggest airline, has offered $1bn (£620m) to entice JAL to the Sky Team alliance. American, which along with JAL is part of the Oneworld alliance, has countered with $1.4bn.

Although the ETIC is likely to reject the new investment, it will reportedly leave JAL's new management to reconsider the offers at a later date.

The US airlines are keen to exploit JAL's huge Asian network and strengthen their presence in Japan ahead of the expansion of Haneda airport in Tokyo in October.

"Delta continues to be in discussion with JAL about forming a long-term strategic partnership," a Delta spokeswoman told Reuters. "Details of those discussions are confidential."

The government is expected to announce its final decision this week, with bankruptcy procedures to follow a week later.

Posted at 07:41PM Jan 11, 2010 by Kelly Board in The Economy  |  Comments[0]