Asia’s leading carrier to get $10 billion bailout

By Tomoko A. Hosaka

Associated Press

TOKYO — Japan Airlines filed for one of the country’s largest bankruptcies ever Tuesday, entering a restructuring that will shrink Asia’s top carrier and its presence around the world.

Enlarge photo

Junji Kurokawa, Associated Press Japan Airlines jet taxies Tuesday at Haneda Airport in Tokyo. In one of the nation's largest corporate failures, the carrier filed for bankruptcy Tuesday, entering a restructuring from which it seeks to emerge leaner and free of $25.6 billion in debt.

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Staggering under a $25.6 billion debt mountain, the carrier applied for protection from creditors under the corporate rehabilitation law — Japan’s version of Chapter 11 — with the Tokyo District Court.

There was no word on the outcome of a fierce tug of war between Delta Air Lines and American Airlines for a slice of JAL’s business. Despite its woes, the airline’s access to Asia is a mouthwatering prize for foreign airlines.

Japan’s flagship airline will slash nearly 16,000 jobs, reduce pensions for retired staff, cut routes and shift to more fuel-efficient aircraft as part of its restructuring.

Some $10 billion of government cash will keep JAL’s planes in the air during the reorganization. The bankruptcy is the fourth largest in Japan, according to figures from Teikoku Databank, which tracks corporate failures.

JAL President Haruka Nishimatsu resigned, bowing deeply as he apologized for the company’s troubles. Kazuo Inamori, a Buddhist monk and founder of Kyocera Corp. and Japan’s No. 2 mobile carrier KDDI Corp., has been tapped as its next leader.

JAL said flights will continue uninterrupted and frequent fliers will not lose their miles.

JAL shares, which have lost more than 90 percent of their value over the past week, tumbled another 40 percent Tuesday to 3 yen before finishing flat at 5 yen. The company is now essentially worthless.

Nevertheless, American and Delta have continued to battle over JAL. Delta and its SkyTeam partners have offered $1 billion, including $500 million in cash to lure JAL away from American’s oneworld alliance. American Airlines and its partners say they would inject $1.4 billion cash into the Japanese airline.

“Delta and SkyTeam fully support Japan Airlines and stand ready to provide assistance and support in any way possible,” the Atlanta-based airline said in a statement after JAL’s bankruptcy filing.