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Japan Airlines’ shares sink as bankruptcy looms

Japan Airlines (JAL) shares fell a further 11.8% yesterday as investors brace for a probable bankruptcy filing on 19-Jan-2010. JAL’s largest lenders, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group, are reportedly now prepared to proceed with the proposed court-led reconstruction, after initially rejecting the plans.

The Japanese government is reportedly finalising a plan for JAL file for bankruptcy with a guarantee of public support so that operations can continue. The Enterprise Turnaround Initiative Corp of Japan (ETIC) will reportedly establish a credit line of more than USD6.5 billion along with the state-owned Development Bank of Japan to ensure the carrier remains operational.

Delta Air Lines and American Airlines will reportedly not be invited to invest capital into JAL, at least initially, as it could “complicate” the carrier’s restructuring efforts, although the potential for a business tie-up with the US airlines remains.

Elsewhere, China Airlines’ shares advanced 0.9% on Friday as the Taiwanese carrier reported a 37% year-on-year increase in revenue in Dec-2009.

Malaysia Airlines’ shares rose 3.5%. The Centre for Asia Pacific Aviation issued a report suggesting a four-way tie-up between Qantas/Jetstar/AirAsia/Malaysia Airlines “could really be a killer combination, with major benefits for all concerned”. See the report: AirAsia and Jetstar join forces: a potential killer combination in Asia

Asia Pacific selected airlines daily share price movements (% change): 08-Jan-2010