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JAL seeing some progress in pension reductions

6-Jan-2010 10:24 AM

Japan Airlines (JAL) and the Japan Government reported the following developments on 05/06-Jan-2010:

  • Creditors/Bankruptcy Plan: Development Bank of Japan (DBJ) and the Ministry of Finance reportedly plans to proceed with court-led bankruptcy proceedings premised on working out restructuring measures in advance with creditors (The Nikkei, 06-Jan-2010). This prepackaged-bankruptcy option is preferred by the government-backed Enterprise Turnaround Initiative Corp of Japan (ETIC), but opposed by JAL and the Transport Ministry. JAL's main creditors, Mizuho Corporate Bank Ltd, Bank of Tokyo-Mitsubishi UFJ Ltd and Sumitomo Mitsui Banking Corp, are reportedly also opposed to the brankruptcy plan, with talks between the three banks, the ETIC and the Transport Ministry stalling, as the banks expressed concern that a court-led rehabilitation process could have a negative impact on the airline's operations and damage consumer confidence in the airline (Dow Jones, 06-Jan-2010). Separately, Japan’s Transport Minister, Seiji Maehara, indicated that bankruptcy proceedings were still an option for the loss-making airline, stating the priority was to keep the carrier operational (AFP, 06-Jan-2010). He commented, "specific measures are more important than the form" of the restructuring;
  • Pension reductions: JAL stated it received support from 68% of current employees and a third of the airline’s 9,000 existing retires for pension reductions of approximately 50% and 30%, respectively (Bloomberg/AFP, 05-Jan-2010);
  • CEO news: ETIC reportedly plans to appoint an outsider with no aviation experience as a successor to current JAL CEO, Haruka Nishimatsu (Dow Jones/Nikkei, 06-Jan-2010). If such a situation eventuates, it would mark the first time JAL would be led by someone without aviation experience. Mr Nishimatsu is expected to step down from the CEO position if ETIC agrees to lead JAL's restructuring (a decision is expected on 20-Jan-2010). Most JAL Directors and Executives are also expected to resign at the same time to take responsibility for JAL's current situation and to increase public support for the reorganisation process;  
  • Slots: Minister Maehara stated ANA has not discussed acquiring international routes from JAL with the Transport Ministry, following reports in the Yomiuri Shimbun that ANA is considering taking over JAL’s international operations (Bloomberg, 05-Jan-2010).