25-Sep-2009 10:52 AM

JAL requests public funds to boost financial standing

Japan Airlines Corp President and CEO, Haruka Nishimatsu, and Transport Minister, Seiji Maehara, met yesterday to discuss the options available for the carrier (Bloomberg/Dow Jones/Japan Today/AP/Reuters, 24/25-Sep-2009). Following talks with JAL, Mr Maehara also met with officials from the Development Bank of Japan and the carrier’s creditor banks, including Mitsubishi UFJ Financial Group and Mizuho Financial Group. Highlights include:

  • Government funding: JAL stated it plans to apply for public funds, under the Industrial Revitalisation Law, to boost the carrier’s financial standing, to enable it to proceed with its drastic restructuring measures. No specific amount was disclosed.;
  • Government/creditor response: Mr Maehara took a cautious stance, stating details of JAL's rehabilitation plan were "not sufficient," and that he will make a final decision when he discusses the issue with Prime Minister, Yukio Hatoyama, by the end of this month. The carrier’s creditors also expressed doubts about extending further loans to JAL with the current restructuring plan;
  • Lack of Capital: JAL reportedly needs to raise JPY150 billion (USD1.6 billion) in capital by 30-Nov-2009, with a further JPY100 billion by 31-Mar-2009, to support its continued operations;
  • Route Rationalistion: Mr Nishimatsu stated there is no change in its plans to eliminate 50 international and domestic routes;
  • Division of operations: Mr Maehara denied media reports that the Government and major creditor banks of JAL are considering splitting the company into profitable operations and loss-making businesses to accelerate its restructuring, stating, ‘‘we are not considering anything other than for JAL to rebuild on its own”;
  • Restructure plan: JAL has not been requested to file a new plan;
  • International partners: British Airways confirmed that it, American Airlines and oneworld alliance members are currently in talks with JAL to discuss deeper cooperation in the future. American Airlines added that it is in talks regarding options ranging from a joint business relationship to “possible capital or financing arrangements”. Delta Air Lines is also in talks with JAL.

Japan Government: “I'm skeptical about the feasibility of JAL's rehabilitation plan, so at this stage, I have yet to say whether the government will inject public funds to JAL. I would like to make a Cabinet decision as soon as possible after debating this matter with Hatoyama," Seiji Maehara, Minister of Land, Infrastructure, Transport and Tourism. Source: Dow Jones, 24-Sep-2009.

Japan Airlines:  “Ultimately we think that the use of more funds will reduce our debts to the public,” Haruka Nishimatsu, President. Source: AFP, 25-Sep-2009.

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