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Business

Debt-crippled Japan Airlines files for bankruptcy

Text by News Wires

Latest update : 2010-01-20

Japan Airlines, Asia's biggest carrier, went bankrupt Tuesday with 26 billion dollars of debt in one of the country's biggest ever corporate failures. The airline has plans to cut about 30% of its workforce, amounting to 15,600 jobs.

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 15,000 job cuts.

JAL, Asia's biggest carrier, reassured passengers that its flights would not be interrupted after it sought court protection from its creditors and moved to delist its shares from the stock exchange.

The government announced a 3.3-billion-dollar injection of public funds and fresh emergency loans of 6.6 billion dollars for the airline, which will slash about 15,600 jobs -- 30 percent of its workforce.

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.

But the airline said it was confident it could swiftly revitalise its business under the Corporate Rehabilitation Law and "be reborn as a leading airline group that could again lead the global airline industry".

"Effects on customers will be avoided," it added.

Japan Airlines shares will be delisted from the Tokyo Stock Exchange on February 20 or earlier, the bourse said on its website, a move expected to result in shareholders losing most or all of their investment.

The bankruptcy is Japan's biggest corporate failure outside the financial sector since World War II, according to Tokyo Shoko Research, an advisory firm.

JAL 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.

JAL 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 jumbo jet.

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 high-tech parts supplier Kyocera Corp. and a company that later became part of KDDI Corp., now Japan's number two telecoms firm.

"He seems to have charisma, which is a good thing," said Makoto Murayama, an analyst at Nomura Securities.

"At the moment JAL employees don't really want to admit that they work for the company. If someone can restore their pride and lead them, the chances of a recovery could increase."

Eyeing its lucrative Asian landing slots, US carriers American Airlines and Delta Air Lines are now in a bidding war for a slice of JAL.

The Japanese airline made no announcement Tuesday about which US carrier it would tie up with.

Dutch carrier KLM said on Monday that talks involving Air France-KLM and Delta on JAL's future were "going well", after reports that the Japanese airline had agreed to tie up with Delta and switch to the SkyTeam alliance.

Experts say radical downsizing is long overdue at JAL, which has been hobbled by high costs since its days as a state-owned flag carrier and is overexposed to unprofitable domestic and overseas routes.

"The problem is that the government lacks a clear vision on what to do with JAL's international network," said Yasuhiro Matsumoto, a credit analyst at Shinsei Securities. "They are focused on assisting JAL."

Date created : 2010-01-19

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