Japan to bail out JAL: reports

(AFP) – Oct 17, 2009

TOKYO — Japan's new centre-left government is set to bail out troubled Japan Airlines after creditor banks rejected a restructuring plan submitted by Asia's biggest carrier, reports said Sunday.

A task force of corporate rescue experts overseen by Transport Minister Seiji Maehara wants a new quasi-public agency to take a majority stake in JAL and rebuild the ailing airline, the Sankei Shimbun said.

Maehara's task force wanted creditor banks to forgive debts of more than 250 billion yen (2.75 billion dollars) racked up by JAL. But the banks say that would be too big a burden for them to carry, the Sankei said.

The banks had rejected a total assistance package for JAL worth 300 billion yen, including the loan waiver and a debt-equity swap, the Nikkei business daily said.

But the creditors did not want to force JAL into bankruptcy, the Nikkei added.

JAL's fate could thus be decided by the Enterprise Turnaround Initiative Corp. of Japan, which the new government launched on Friday to help debt-laden companies that are seen as having the potential to recover.

However, since taking office last month, the centre-left Democratic Party has made clear that JAL must do more to get its own house in order before it receives any public funds.

The airline was initially offering to cut 6,800 jobs, drastically reduce its route network and seek a tie-up with a foreign carrier.

Under government pressure, JAL is now reportedly ready to shed 9,000 jobs and oust its president, Haruka Nishimatsu.

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