MercoPress. South Atlantic News Agency

The process to keep Japan’s flag carrier alive has began, says minister

Foreign airlines want access to JAL lucrative Asian routes

Japan Airlines is to slash about 15,700 jobs and receive an 8 billion USD lifeline as part of turnaround efforts after filing for bankruptcy protection. The collapse of JAL, Asia’s top carrier was widely expected after it struggled with the aviation downturn and a debt burden of more than 25 billion USD.

Under the arrangement, JAL will stay in the air thanks to the 8 billion USD injection from the Enterprise Turnaround Initiative Corporation fund. The sweeping restructuring will be undertaken under a new board, headed by newly-appointed chief executive Kazuo Inamori, a Buddhist monk and the founder of the technology firm Kyocera.

The move will see it cut unprofitable routes and use the state-backed rescue cash to replace some of its older, larger and less fuel-efficient planes. Shareholders will lose everything and lenders will be asked to forgive some 8 billion USD of the debt pile.

JAL shares, which have fallen more than 90% since the start of the month, closed flat at just over 3p in Tokyo trading. They will be de-listed on February 20, according to the stock exchange.

JAL, whose access to Asian routes makes it an attractive business partner, has been at the centre of a tug-of-war during its slide towards collapse. Delta Air Lines has tried to woo JAL away from Oneworld allies American Airlines, British Airways and Qantas.

Delta and its Sky Team have offered to pump a billion USD into JAL, and said after the bankruptcy filing that they “stand ready to provide assistance and support in any way possible”.

American Airlines and its Oneworld partners have previously said they were ready to pump in more than 1.3 billion USD.

The bankruptcy is the fourth-largest in Japan. However “this is not the end of JAL” said transport minister Seiji Maehara. “Today is the beginning of a process to keep JAL alive.”

JAL said flights will continue uninterrupted and frequent fliers would not lose their miles. Tokyo asked foreign governments for co-operation to keep JAL flying around the world.

The bankruptcy represents a humbling outcome for Japan's once-proud flagship carrier, which was founded in 1951 and came to symbolize the country's rapid economic growth. The state-owned airline expanded quickly in the decades after the Second World War and was privatized in 1987.

When Japan's property and stock bubble of the 1980s burst, risky investments in foreign resorts and hotels undermined its bottom line.

More recently, JAL's passenger traffic has slowed amid the global economic downturn, swine flu fears, competition and safety lapses that tarnished its image.