Japan Airlines nosedives into bankruptcy
Tokyo: Japan Airlines filed for bankruptcy protection on Tuesday and vowed to slash nearly 16,000 jobs and unprofitable routes as it tries to survive volatile fuel costs and fickle fliers. JAL, Asia’s largest airline by revenues, will remain in the skies thanks to nearly $11-billion state-backed support and must go through a sweeping restructuring under a new board and management. It owes more than $25 billion. Shareholders will be wiped out and creditors will forgive 730 billion yen ($8 billion) in debt, including a 350 billion yen ($3.8 billion) debt waiver from banks, as part of the deal with the Enterprise Turnaround Initiative of Japan (ETIC). The ETIC will support the carrier with about 300 billion yen ($3.3 billion) in capital. The ETIC and the Development Bank of Japan will together provide a 600 billion yen ($6.6 billion) credit line. But bankruptcy will only be the beginning for an airline with depleted capital, facing headwinds such as rising fuel prices and shrinking passenger numbers, on top of hefty restructuring costs. JAL, which has now been bailed out four times in the past 10 years, will replace many of its less fuel-efficient planes. “We’re now finding out that things were a bit worse than expected,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. “What this shows is that the nation won’t just take total care of a company. They’ve now said they’ll let badly run companies fail”, he said. Shares of JAL, which have fallen more than 90% since the start of the month, closed flat at 5 yen after trading down 2 yen to 3 yen. They will be delisted on February 20, according to the stock exchange. With a market value of about $150 million, JAL is now smaller than minor carriers Croatia Airlines and Jazeera Airways and is worth less than one Boeing 747. “I thought that there was no way that JAL would fail,” said Akiko Saito, a 63-year-old retiree returning from Sydney to Tokyo’s Haneda Airport. “Even when the value of my JAL shares fell from 800,000 yen to below 120,000 yen, I was convinced that it would recover.” The dollar fell to its session low against the yen on the news. The development could make rival All Nippon Airways Japan’s new flagship carrier. REUTERS * Caught In Air Pocket * International air travel fell around 4.1% last year, causing industrywide losses of $11 billion US regional carrier Mesa Air has also sought bankruptcy this month Delta sought the largest bankruptcy by a US carrier in Sep 2005 with $28 bn of debt. The airline emerged from bankruptcy in March 2007 Swissair and affiliate Sabena SA, the Swiss and Belgian carriers, failed in 2001 after Sept 11 attacks Italian carrier Alitalia was broken up in 2008 The JAL bankruptcy is the biggest failure outside the financial sector since WW-II--
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