30-Dec-2009 11:07 AM

JAL bankruptcy is reportedly the preferred restructuring option

Japan Airlines and the Japan Government reported the following developments in its restructuring efforts on 29/30-Dec-2009:

  • Restructuring through bankruptcy: JAL's restructuring through bankruptcy proceedings is reportedly the state-affiliated Enterprise Turnaround Initiative Corporation’s (ETIC) preferred option (Asahi Shimbun, 29-Dec-2009). ETIC has reportedly proposed the option to the airline’s main creditors, although they had not necessarily agreed with such an option (Financial Times, 29-Dec-2009). The ETIC is expected to make a final decision on whether to support JAL with loans and investments in Jan-2010;
  • Labour unions: Japan Airlines Workers’ Union stated it believes a “change in the pension system is necessary for JAL’s restructuring”, indicating support by the union for a proposal by the carrier to reduce pensions for current employees (Asahi Shimbun, 29-Dec-2009). Members of three unions that represent approximately 65% of employees reportedly support the plan. The airline requires the support of two-thirds of retirees and employees to back the reduction, part of wider cost-cutting plans designed to return the company to profit;
  • Commercial transactions: JAL's fuel purchases and other commercial transactions will reportedly be backed by a Japanese Government-affiliated company, if the carrier files for bankruptcy (Nikkei English News, 30-Dec-2009);
  • Payment protection: JAL has had Payment Protection cover against airline failure withdrawn by some insurance underwriters (Alternative Airlines, 29-Dec-2009).   

Want More News Like This?

CAPA Membership provides access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find Out More