JAL bankruptcy forces service cuts
Japan Airlines Corp has filed for bankruptcy protection owing more than $25 billion, and vowed to slash 15,700 jobs and withdraw from many routes in an effort to survive.
JAL, Asia's largest airline by revenues, will remain in the skies thanks to nearly 1 trillion yen ($11 billion) in support from a state-backed fund and must go through a sweeping restructuring under a new board and management.
Shareholders will be wiped out and lenders will forgive a larger-than-expected 730 billion yen in debt as part of the deal with the fund, the Enterprise Turnaround Initiative Corp of Japan (ETIC).
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 heavy restructuring costs.
JAL, which has now been bailed out by the Japanese government four times in the past 10 years, will cut 31 routes and replace many of its older and less fuel-efficient planes. It also faces tough decisions about foreign capital and alliances.
JAL's 2.3 trillion yen bankruptcy ranks as Japan 's fourth-largest ever and its biggest by a non-financial firm. The company's market value had shrunk to about $150 million, making it smaller than minor carriers Croatia Airlines and Jazeera Airways and worth less than one Boeing 747.
The airline's restructuring plan calls for slashing its 51,862 workforce to 36,201 and cutting 14 international routes and 17 domestic routes in three years, the government said.
JAL will also need to make a decision about competing aid offers from Oneworld alliance partner American Airlines and rival Delta, which wants to woo JAL to its SkyTeam group.
The plan also calls for increasing the fuel efficiency of JAL's fleet, replacing all 37 of its B747-400 jets and 16 MD90s, both supplied by Boeing, with 33 small jets and 17 regional ones. Such a move could be good news for manufacturers such as Mitsubishi Heavy Industries, which is developing a new regional jet.