TRAVELHotNews.com Magazine

Click here to print

19 January 2010

Send to a friend

JAL FILES FOR BANKRUPTCY

Japan Airlines files for bankruptcy; will cut nearly 16,000 jobs; Japan’s fourth-largest corporate failure

Japan Airlines filed for one of the country's largest bankruptcies ever Tuesday, entering a restructuring that will shrink Asia's top carrier and its presence around the world, reported the Associated Press.

Staggering under a US $25.6-billion debt mountain, the carrier applied for protection from creditors under the Corporate Rehabilitation Law - Japan's version of Chapter 11 - with the Tokyo District Court.

Japan's flagship airline will slash nearly 16,000 jobs, reduce pensions for retired staff, cut routes and shift to more fuel-efficient aircraft as part of its restructuring.

Government to keep JAL flying

During the reorganization, US $10 billion of government cash will keep JAL's planes in the air. Lenders will forgive US $8 billion in debt, and JAL shares will be removed from the Tokyo Stock Exchange on Feb. 20, wiping out investors.

A state-backed turnaround agency pledged 900 billion yen (US $10 billion) in financial support for JAL - 600 billion yen in credit lines and a 300 billion yen cash infusion. The bankruptcy is the fourth-largest in Japan, according to figures from Teikoku Databank, which tracks corporate failures.

"This is not the end of JAL," transport minister Seiji Maehara told reporters. "Today is the beginning of a process to keep JAL alive." Maehara said the turnaround would involve 15,661 job cuts - a third of JAL's payroll - by March 2013.

Buddhist monk to lead JAL into the future

JAL President Haruka Nishimatsu resigned, bowing deeply as he apologized for the company's troubles. Kazuo Inamori, a Buddhist monk and founder of Kyocera Corp. and Japan's No. 2 mobile carrier KDDI Corp., has been tapped as its next leader.

JAL said flights will continue uninterrupted and that frequent fliers would not lose their miles. Tokyo asked foreign governments for co-operation to keep JAL flying around the world.

The carrier will retire all 37 of its Boeing 747 jumbo aircraft and 16 MD-90s, which will be replaced by 50 small and regional jets. As of March, JAL's fleet consisted of 279 aircraft, mainly from Boeing Co. It served 220 airports in 35 countries and territories, including 59 domestic airports.

Shares obliterated

JAL shares, which have lost more than 90 per cent of their value over the last week, tumbled another 40 per cent Tuesday to 3 yen before finishing flat at 5 yen. The company is now essentially worthless, with a market capitalization of about 13.7 billion yen (US $150 million) - the price of one Boeing 787 jet.

American, Delta battle over JAL

Nevertheless, American and Delta have continued to battle over JAL. Delta and its SkyTeam partners have offered $1 billion, including $500 million in cash to lure JAL away from American's oneworld alliance. American Airlines and its partners say they would inject $1.4 billion cash into the Japanese airline.

More recently, JAL's passenger traffic has slowed amid the global economic downturn, swine flu fears, competition from Japanese rival All Nippon Airways Co. and a spate of safety lapses that tarnished its image. It lost 131.2 billion yen ($1.4 billion) in the six months through September.