JAL shares sink on eve of expected bankruptcy filing

TOKYO: Japan Airlines shares plunged to an all-time low of just five yen (seven Singapore cents) yesterday, on the eve of an expected bankruptcy filing by the carrier that could be one of the biggest in Japan in recent decades.

JAL shares slid two yen, or 28.6 per cent, to end at five yen as investors bailed out ahead of an announcement today on a state-backed restructuring package for the troubled airline.

The market value of the once-venerable carrier now stands at just US$150 million (S$210 million), less than the cost of a new jumbo jet.

With debts estimated at about two trillion yen, a JAL bankruptcy would be the biggest failure among Japanese non-financial firms since World War II, according to advisory firm Tokyo Shoko Research.

JAL, which lost about US$1.5 billion in the six months to September, has already received an emergency loan from a state-backed bank and is seeking more public aid in the face of mounting debts.

According to Japanese media, JAL is set to receive an injection of public funds worth several hundred billion yen under a turnaround plan that would see it file for bankruptcy but continue flying. Its creditor banks are also expected to be asked to forgive loans worth several hundred billion yen.

In a painful bid to return to profitability, the airline will reportedly slash more than 15,000 jobs - roughly a third of its workforce - and sell non-core assets such as hotels to stem massive losses.

'Until now, JAL has never been able to carry out a fundamental restructuring,' said Mr Katsuyuki Nakai, an analyst at the credit ratings agency Standard and Poor's. 'The key is whether it can quickly implement truly effective policies.'

JAL has been hit hard by industry turbulence unleashed by the Sept 11, 2001 terrorist attacks in the United States, the Iraq war and the global financial crisis, as well as the Sars, bird flu and H1N1 health scares.

The formerly state-owned carrier - the recipient of a series of government bailouts - has faced political pressure to service unprofitable routes to small domestic airports built in an effort to revive the ailing economy.

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

The top-selling Yomiuri newspaper reported last Saturday, quoting unnamed company sources, that JAL had reached an agreement to tie up with Delta Air Lines and switch to the SkyTeam alliance.

AGENCE FRANCE-PRESSE

Source: Straits Times, 19 Jan 2010.