21-Oct-2009 10:53 AM

Japan Government intensifies push for JAL restructure; merger talks resume

Japan Government has intensified its push to reach an agreement to restructure Japan Airlines Corp (JAL), hoping to reach agreements within days with officials and creditors, on measures that could increase job reductions and route rationalisation and could involve an injection of public funds (Nikkei Weekly/Kyodo/The Yomiuri Shimbun/AFP/Reuters/Bloomberg/Financial Times, 20-21-Oct-2009):

  • Public funds: Japan Finance Minister, Hirohisa Fujii, and Transport Minister, Seiji Maehara, stated the government may use fresh public funds to revive the carrier. Mr Fujii stated a decision on a restructuring plan “will probably be within a few days”, adding, “time is really pressing”. The two Ministers will meet again if a decision is formally made to use fresh public funds to support JAL;
  • Draft restructuring plan: Will be filed by the end of Oct-2009, in line with earlier commitments from the new Government. Mr Maehara added that the “plan is evolving”, although no further details were provided;
  • Debt waiver:  JAL is reportedly seeking a debt waiver through an out-of-court resolution. A private sector corporate revival body will reportedly mediate between the airline and its banks through an “alternative dispute resolution”, according to the Nikkei Weekly. In a separate Bloomberg report, it was reported that JAL has reduced the amount of debt it is requesting banks to write off or convert into equity from JPY300 billion to JPY250 billion (USD2.8 billion). The banks, according to the report, are studying the proposal and seeking to reach an accord by month’s end, when the airline is set to unveil its new business plan; 
  • Executive appointments: The restructuring plan has reportedly asked President Haruka Nishimatsu to step down to enable JAL to receive financial aid from its creditors and has reportedly suggested Shinjirou Takagi and Kazuhiko Toyama, Executive Members of the government-appointed task force, assume positions as JAL Board members to negotiate with the unions, according to the Nikkei Weekly;
  • International partners: Japan Airlines Workers' Union, which represents 9,600 of JAL's total work force of close 50,000, reportedly stated it would welcome an alliance with either Delta Air Lines or American Airlines. The Japanese carrier has reportedly resumed talks with the two US airlines, following a brief pause in the talks.

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