Japan Airlines files for bankruptcy
Pastor Dale Morgan
Japan Airlines files for bankruptcy*
* From: NewsCore
* January 19, 2010 9:04PM
JAPAN Airlines (JAL) filed for bankruptcy protection today as part of a
biting overhaul of the debt-ridden carrier, in one of the country's
biggest ever corporate failures.
Asia's biggest carrier said its flight operations would not be
interrupted by the bankruptcy filing with a Tokyo court, part of a
radical restructuring announced after years of losses as the company
sank deeper into debt.
JAL is to slash about 15,600 jobs - a third of its 47,000 total - and
receive a $US3.3 billion ($3.5bn) injection of public funds as part of
its turnaround efforts, the Government said.
Japan Airlines shares will be de-listed from the Tokyo Stock Exchange on
February 20 or earlier, the bourse said on its website.
The bankruptcy is Japan's biggest failure outside the financial sector
since World War II, according to Tokyo Shoko Research, an advisory firm.
JAL shares plunged to an all-time low of about 3 US cents at one point
Tuesday, reducing the market value of the group to about $90 million
($97.5m) - far less than even the cost of a new jumbo jet.
The filing follows months of talks between the carrier, the Government
and its banks to work out a bail-out for the money-hemorrhaging airline.
Hit by a drop in travelers amid the global economic slump, the spread of
swine flu, and its own reluctance to scrap loss-making routes, JAL
posted its largest-ever quarterly net loss in the three months ended
June 2009.
"JAL has no choice but to show that it can keep its operations running
without disruption (to avoid losing its customers). This is very
important," said Mitsuru Miyazaki, an analyst at SMBC Friend Research
Center.
To prove flight services are operating as normal, "they can't stop even
a single flight," he said.
JAL will use the nation's Corporate Rehabilitation Act, which typically
requires incumbent management to be dismissed from the troubled
company's board, before it works toward cleaning up its financial mess
with the help of court-appointed administrators.
It is not clear how long JAL's revival will take due to the massive size
of its liabilities and the broad scope of its business transactions,
which include jet fuel procurement and aircraft leasing, both in Japan
and overseas.
"One thing that can become a big future problem is whether the court
protection will be valid outside Japan as an international bankruptcy
case," said Hideyuki Kobayashi, an attorney at Blakemore & Mitsuki law
office in Tokyo.
The bankruptcy protection prohibits execution of the rights in
collateral, meaning, for instance, JAL will be able to use aircraft it
operates on a leasing basis.