Thursday, December 31, 2009

Japan Airlines 'may stop international flights'

AFP - Friday, January 1

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 on Thursday.
TOKYO (AFP) - – Japan Airlines (JAL) may stop flying international routes under a plan being discussed by the government to try to keep the debt-ridden company in the air, a report said Thursday.

The plan calls for rival All Nippon Airways (ANA) to take over JAL's international flights as part of what would be a drastic downsizing scheme for Asia's biggest airline, the Mainichi Shimbun newspaper 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 programme.

The transport ministry has strongly opposed the plan to turn JAL into a domestic carrier despite growing calls for a drastic restructuring of its international operations where losses weigh heavily, 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.

Immediate confirmation of the report was not available.

In a related move, Maehara held talks with vice Prime Minister Naoto Kan and other officials Thursday and agreed that the state-run Development Bank of Japan will offer further loans to JAL.

The DBJ has already disbursed just over half of a 100 billion yen (1.08 billion dollar) credit line extended in November. "On top of the remaining 45 billion yen, (DBJ) is to expand the limit," Maehara told reporters.

Cabinet officials said they would discuss details of further loans to JAL on Sunday before making an official announcement, while local media reported that DBJ is likely to double its credit line to 200 billion yen in total.

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 plunged to a record low on Wednesday as media reports that bankruptcy is one option for the cash-strapped carrier spooked investors.

The Tokyo stock market was closed for a holiday on Thursday.

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 1.5 billion dollars 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.

The global economic downturn has dealt a heavy blow to JAL's efforts to recover from a long period of financial turbulence stretching back to its privatisation more than two decades ago.

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