The Japanese government is discussing an option to strip debt-ridden Japan Airlines (JAL) of its international operations to enable it to survive as a domestic carrier, a newspaper reported yesterday.
The government is calling for rival All Nippon Airways (ANA) to take over JAL’s international flights as part of its downsizing scheme, the Mainichi Shimbun said.
The scheme was apparently on the table when key Cabinet officials, including Transport Minister Seiji Maehara, met on Wednesday to discuss JAL’s rehabilitation program.
However, the transport ministry was strongly opposed, despite the growing calls for a drastic restructuring of JAL’s international operations where losses weigh heavily on the airline, the newspaper said.
“[JAL] will be a good company if it abandons international routes and concentrates on domestic flights,” an unnamed JAL executive was quoted by Mainichi as saying.
TALKS
In a related move, Maehara held talks with Vice Prime Minister Naoto Kan and other officials on Saturday and agreed that the state-run Development Bank of Japan would expand loans to JAL from its early offer of ¥100 billion (US$1.08 billion), Jiji Press said.
The Development Bank of Japan has already disbursed ¥55 billion of the credit line extended in November.
“On top of the remaining 45 billion yen, [the bank] is to expand the limit,” Maehara told reporters, according to Jiji.
Cabinet officials will discuss details of further loans to JAL on Sunday before making an official announcement, Jiji added.
JAL, battered by the global recession and swine flu pandemic, is scrambling to slash costs and is seeking its fourth government bailout since 2001 to keep flying in the face of mounting losses.
Shares in Asia’s biggest carrier plunged to a record low on Wednesday as investors were spooked by reports in the media suggesting that bankruptcy is one of the options for the cash-strapped carrier.
The Tokyo stock market was closed for a holiday yesterday.
PROTECTION
Local media have reported that the state-backed Enterprise Turnaround Initiative Corp, which is overseeing JAL’s restructuring, is considering the possibility of the carrier filing for protection from creditors.
It has also been offered financial assistance by both American Airlines and Delta Air Lines, who are competing to take a minority stake in the Japanese carrier, eyeing its coveted Asian landing slots.
JAL, which lost about US$1.5 billion in the six months to September, has said it plans thousands of job cuts and a drastic reduction in routes as part of its efforts to return to profitability.
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