TOKYO (AFP) - – Japan Airlines went bankrupt Tuesday with 26 billion dollars of debt in one of the country's biggest ever corporate failures, beginning a painful overhaul involving more than 15,600 job cuts.
JAL, a once-proud flag carrier now worth less than a jumbo jet, reassured passengers its flights would not be interrupted during the bankruptcy, which is similar to the process used to revive ailing US auto giant General Motors.
Asia's biggest airline, which carries more than 50 million passengers every year, will slash 30 percent of its workforce and receive almost 10 billion dollars of public funds and emergency loans under a three-year turnaround plan.
JAL said it aimed to "be reborn as a leading airline group".
But transport minister Seiji Maehara warned the government would not keep bailing out JAL indefinitely, saying it would have pulled the plug on the group if it were not such an important company.
Once-proud JAL victim of Japan's economic decline
"JAL will have to fly on its own after three years," he said. "Looking to the future for the aviation industry, we have to determine if two mega-carriers should exist or not."
Japan's top carrier has fared much worse than smaller rival All Nippon Airways in recent years.
Its shares plunged to an all-time low of just three yen (three US cents) at one point earlier Tuesday, reducing the market value of the group to about 90 million dollars -- far less than even the cost of a new Boeing jumbo.
The stock will be delisted from the Tokyo Stock Exchange on February 20 or earlier, a move expected to wipe out shareholders' investments.
Even so, analysts said bankruptcy appeared to have been the best option.
"Filing for bankruptcy protection was done in a quick and transparent way, and this is positive for JAL's business outlook," said Mitsushige Akino, fund manager at Ichiyoshi Investment Management Co.
The approach of the four-month-old government contrasts with the approach of previous conservative administrations which simply "threw money at JAL to keep it afloat", he said.
The ups and downs of Japan Airlines
JAL made no announcement regarding its tie-up talks with American Airlines and Delta Air Lines, which are in a bidding war for a slice of the Japanese carrier, eyeing its lucrative Asian landing slots.
Delta said it and the SkyTeam airline alliance "fully support Japan Airlines and stand ready to provide assistance and support in any way possible", Delta said Tuesday.
JAL potential saviour: management guru and monk
American Airlines issued a statement saying JAL's bankruptcy would not affect the Japanese carrier's current relationship with the oneworld alliance.
The government has tapped Kazuo Inamori, a 77-year-old entrepreneur and ordained Buddhist monk, to run the stricken airline during its overhaul, replacing Haruka Nishimatsu who resigned as president Tuesday.
Inamori is one of Japan's most respected business executives and management gurus, having founded both electronic parts maker Kyocera Corp. and a company that later became part of KDDI Corp., now Japan's number two telecoms firm.
The collapse of the carrier, once a pillar of Japan Inc., has raised concerns among Japanese about the broader woes of their economy, which is back in deflation and set to be overtaken by China as the world number two.
Crew, passengers fret about future of JAL
"With JAL's bankruptcy, people are becoming increasingly gloomy about the economy," Hideharu Seiyama, a 43-year-old regular JAL passenger, told AFP at Tokyo's Haneda Airport.
"JAL carried the country on its back and it was known the government would foot the bill, so it was managed on the assumption it would never fail."
JAL went bust with debts of about 2.32 trillion yen (25.7 billion dollars), becoming one of the highest profile victims of Japan's long economic malaise.
It is the country's biggest ever bankruptcy outside the financial sector.
The airline is expected to post a massive operating loss of about 2.9 billion dollars in the current financial year to March, according to the state-backed body overseeing its turnaround efforts.
Creditors will forgive 730 billion yen of debt and the airline said it was confident it could swiftly revitalise its business under the Corporate Rehabilitation Law -- Japan's version of Chapter 11 in the United States.
The group has been hit hard by industry turbulence unleashed by the September 11, 2001 terror attacks in the United States, the Iraq war and the global financial crisis, as well as global health scares in the past decade.
It aims to retire its 37 gas-guzzling Boeing jumbo 747-400s and switch to more fuel-efficient aircraft.