Japan Airlines Corp (JAL) outlined restructuring plans yesterday that include cutting 30 percent of its global workforce and additional financing to keep flying after filing for bankruptcy protection in January.
JAL submitted the plans to the Tokyo District Court, the company said in a statement. The plans, in the works over recent months, also includes selling off subsidiaries and dropping unprofitable domestic and international routes.
The announcement culminates years of difficulty for Japan’s flagship carrier, battered by safety lapses, ballooning pension payments and the need to streamline its flight routes amid intensifying global competition.
PHOTO: AFP
The plan is being orchestrated as a government-backed bailout, under a group called the Enterprise Turnaround Initiative Corp (ETIC) of Japan.
About 16,000 jobs will be cut, although the job reductions will be partly the result of selling off subsidiaries, JAL said.
The plan also features a ¥520 billion (US$6.2 billion) debt waiver mainly from financial institutions and a ¥350 billion investment in JAL by ETIC, the company said.
The Japanese government and JAL officials are hopeful that the slimmed down carrier can return to profitability through its turnaround plan, including possibilities, such as going into the low-cost carrier business.
In related news, Japan’s factory output unexpectedly rose in July for the first time in two months as companies bolstered production of machinery, chemicals and paper despite signs of a slowing global economy.
Factory production climbed 0.3 percent from June, the Ministry of Economy, Trade and Industry’s monthly report released yesterday showed. The reading beat Kyodo news agency’s average market forecast for a 0.3 percent decline.
“Industrial production continues to show an upward movement although it has been pausing temporarily in part,” the ministry said in a cautious assessment.
The latest figures, however, did little to ease concerns about a strong yen and slowing growth in key markets like China and the US.
Japan’s economy barely grew in the second quarter, and policymakers are now scrambling to protect a faltering recovery. However, financial markets and economists were underwhelmed by both the central bank’s modest efforts on Monday to ease monetary policy and the government’s new ¥920 billion stimulus package.
A breakdown of yesterday’s data also reveals some worrisome details. Transport equipment, which makes up 17 percent of overall production, has fallen for three straight months.
The trend indicates that automakers are already scaling back production before the government’s subsidies for eco-friendly cars expire at the end of this month, said Junko Nishioka, chief economist at RBS Securities Japan.
“Deterioration of business sentiment is likely to cast a dark shadow on corporate activity,” she said.
The economy ministry said surveyed companies expect output to rise 1.6 percent last month and 0.2 percent this month. Shipments fell 0.1 percent, while inventory retreated 0.5 percent.
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