Thursday, January 21, 2010
Japanese Airline files for bankcruptcy , ¥ 2 trillion in debt
JAL files for bankruptcy in record failure
¥ 2 trillion in debt; carrier awaits reconstruction
Japan Airlines Corp. filed for bankruptcy Tuesday under the Corporate Rehabilitation Law in the biggest nonfinancial corporate failure in the postwar period.
The country's flagship carrier is expected to continue flying and honor tickets with government assurances for lifeline funds, while undergoing a three-year rehabilitation process that is expected to entail massive cuts in jobs and in unprofitable routes, both domestic and international.
The airline's debts are estimated at ¥2.3 trillion.
JAL President Haruka Nishimatsu resigned to take responsibility for the airline's failure.
"Today, the government, creditor banks, shareholders and Japanese people have given us a last chance (to reconstruct the company)," Nishimatsu said.
The government-backed Enterprise Turnaround Initiative Corp. of Japan will lead JAL's restructuring, and Kyocera Corp. founder Kazuo Inamori will be the carrier's new CEO.
ETIC officially declared it will resurrect JAL under court-supervised rehabilitation that will involve massive public funds.
"JAL plays a key role in our nation's aviation network, which is a development base of our nation, so needed supports will be provided until it will be reconstructed," transport minister Seiji Maehara said.
Prime Minister Yukio Hatoyama also pledged the government's help.
"What's most important is that all people who are working (for the airline) devote all their energies toward its restructuring," Hatoyama said after the company filed for bankruptcy protection with the Tokyo District Court. "On that premise, the government will support their efforts" so that people can fly on a JAL plane whenever they wish to do so, he said.
JAL held a special board meeting in the afternoon and later filed for protection from creditors along with two key subsidiaries — Japan Airlines International Co. and JAL Capital Co.
The court appointed lawyer Eiji Katayama and ETIC as trustees who will be responsible for drafting and carrying out the reconstruction plan. All top JAL executives will be stepping down, and the new management team is expected to be organized in the beginning of February.
ETIC is planing to cut 15,661 jobs, or about 30 percent of JAL's workforce, by the business year ending in March 2013, and terminating 31 routes. It also plans to sell about half of the airline's affiliate companies, especially those engaged in the hotel and travel businesses, and concentrate on its core airline business.
Meanwhile, the Tokyo Stock Exchange announced that JAL shares will be delisted Feb. 20. JAL's share price dropped to ¥3 at one point during Tuesday trading before closing at ¥5.
Information from Kyodo added