UPDATE: Japan Government Finalizing Rescue Plan For JAL
(Combines comments on JAL by finance and transport ministers; adds background
regarding possible partnerships and internal restructuring.)
By Yoshio Takahashi and Takashi Nakamichi
Of DOW JONES NEWSWIRES
TOKYO -(Dow Jones)- Japan's government is finalizing a rescue plan for Japan
Airlines Corp. (9205.TO) which could see the former national carrier obtain
bridge loans and reduce unfunded pension obligations, while it prepares to
release its latest earnings report this week.
Finance Minister Hirohisa Fujii Tuesday hinted that the government's
compilation of rescue measures could even be concluded by the time JAL reports
its fiscal first-half earnings on Friday. "Based on common sense," he told
reporters, the possibility "is likely."
His comment followed local media reports Monday saying the government will
finalize the rescue plan by the end of the week. The Nikkei in its Tuesday
evening edition also reported Finance Ministry officials saying JAL President
Haruka Nishimatsu will resign early next year to take responsibility for the
airline's poor performance.
At a separate press conference Tuesday, transport minister Seiji Maehara said
the government-led team devising the plan is now focusing on two issues. One is
how the government could help the airline obtain bridge loans needed to continue
operating while its restructuring strategy is determined over the next few
months. The other issue is whether the government should enforce a reduction in
JAL's pension benefits--and therefore obligations--through legislation, and what
kind of scheme, if necessary, could enable such a move.
Meanwhile, as the government works to save the firm, U.S. carriers American
Airlines and Delta Air Lines Inc. (DAL) continue to compete for a partnership
with JAL. The financial benefit of an alliance offers JAL another route to
recovery, while in return the U.S. firms hope to gain access to JAL's lucrative
Asian routes.
Gerard Arpey, chairman and chief executive of American Airlines' parent AMR
Corp. (AMR), said Monday that its Oneworld alliance was the best partner for
Japan Airlines "by a wide margin."
American Airlines, which already has relations with JAL, is telling Japan's
policy makers and industry executives that stronger ties could bring JAL $80
million to $100 million in annual revenue and cost savings. Delta Air Lines, on
the other hand, is willing to assume costs JAL would incur if it severed ties
with American Airlines and joined Delta. Such costs could total $15 million to $
20 million, people familiar with the matter said.
JAL is also engaged in its own effort to return to profitability. Last
Thursday it announced it will discontinue 16 routes to trim operating costs and
cut losses. Combined with previously announced measures, the cuts will improve
JAL's annual operating profit by Y12.2 billion, a spokeswoman said.
Still, the airline is expected to drastically reduce its earnings projection
for the fiscal year through March.
An mean estimate from analysts polled by Thomson Reuters puts JAL's net loss
at Y83 billion, wider than the Y63 billion net loss the airline forecast in
August. Restructuring costs could force the loss even wider.
The carrier posted its largest-ever quarterly net loss of Y99 billion in the
three months ended June 30--its third consecutive quarter of loss--due to a
continued decline in travel brought about by the economic downturn and outbreak
of swine flu.
Apart from the government-crafted rescue plan, JAL said in late October it
would devise a restructuring strategy with the help of Enterprise Turnaround
Initiative Corp., a quasi-government investment fund which has access to up to
Y1.6 trillion in state-guaranteed funds and has the ability to purchase debts of
beleaguered companies.
The ETIC is currently compiling an assessment of JAL's assets.
-By Yoshio Takahashi and Takashi Nakamichi, Dow Jones Newswires; 813-6895-
7561; yoshio.takahashi@dowjones.com
(Mariko Sanchanta contributed to this article.)
(END) Dow Jones Newswires
11-10-090251ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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