JAL urges retirees and employees to accept pension payout reductions; bankruptcy still possible
Japan Airlines Corp yesterday urged retirees and employees to accept an average 40% reduction in their pension payout, a move crucial to the airline's survival (the Japanese Government has emphasised that the carrier will not receive a taxpayer-funded bailout unless it can contain it high-cost pension system) and failure of which could result in JAL filing for bankruptcy (Kyodo/Reuters/ The Yomiuri Shimbun/Bloomberg, 24-Nov-2009). Under the plans, pension benefits would be cut by approximately 30% for retired employees and by 53% for current employees. To reduce its pension obligations, JAL is reportedly requesting to change the annual interest rate on pension reserves from the current 4.5% to a variable rate tied to benchmark Japanese Government bonds, currently at approxiamtely 1.3%. The change will impact 17,000 current employees and approximately 9,000 retirees. The reduction has been strongly opposed and can be rejected under current laws which require an approval of at least two-thirds of pensioners. JAL President, Haruka Nishimatsu, stated the carrier aims to resolve the costly pension issue by the end of Jan-2010, with the carrier planning to inform retirees of the precise reduction as early as mid-Dec-2009.
Japan Airlines: "With our current state, it will be difficult to turn around the company without public funds. I first want to explain the fact that pension reforms will be necessary to reconstruct our company through obtaining public funds in a way that can gain public acceptance. My biggest and last mission is to pass on the company, in its concrete form, to the next generation. I will make a decision on my future in an appropriate manner and it will not take long," Haruka Nishimatsu, President. Source: Kyodo News, 24-Nov-2009.