JAL shares drop as bankruptcy looms

Saturday, January 09, 2010
TOKYO: Japan Airlines (JAL) took another dive on the Tokyo stock market on Friday following news reports that the government is finalising a bankruptcy option for the debt-ridden carrier. Shares in Asia’s biggest airline sank 11.8 per cent to close at 67 yen.

The Japanese government is now finalising a plan to have JAL file for bankruptcy with a guarantee of public support so it can continue operations, Jiji Press and Kyodo News said. Transport minister Seiji Maehara and newly-appointed Finance Minister Naoto Kan held a closed-door meeting on Friday morning with the state-backed Enterprise Turnaround Initiative Corp, which is overseeing JAL’s restructuring.

Japan’s government has pledged to avoid a collapse of the former state-owned carrier, but has refused to rule out bankruptcy proceedings, which could aid JAL’s restructuring but would likely leave investors out of pocket.

Asked if the government is ready to provide support in case JAL filed bankruptcy, Kan told reporters the government was “fully considering such a situation.” Maehara separately said: “Our stance is that we would like the Enterprise Turnaround Initiative Corp to rebuild (JAL) with public funds.” The body will decide on the carrier’s rescue plan on January 19, likely using a prepackaged bankruptcy, the Asahi Shimbun reported on Friday.

Earlier reports said the turnaround body is preparing a 300 billion yen ($3.2 billion) investment if the airline files for bankruptcy while intending to ask JAL’s creditors to waive a further 300 billion yen in loans to the airline.