Japan Airlines shares dive on bankruptcy fears

Thursday, December 31, 2009
TOKYO: Fears deepened on Wednesday about the future of debt-ridden Japan Airlines as shares in Asia’s biggest carrier plunged to a record low on fears it might file for bankruptcy, dealers said.

JAL, battered by the global recession and swine flu pandemic, is scrambling to slash costs and seeking its fourth government bailout since 2001 to keep flying in the face of mounting losses. Media reports that bankruptcy is one option for the cash-strapped carrier have spooked investors.

Shares in the airline slid to 60 yen at one point, the lowest level since JAL merged with Japan Air System Co. in 2002.

They ended the day down 23.9 per cent at 67 yen, after an 8.3 per cent dive on Tuesday.

“Speculation is rife that JAL may face court-led proceedings, which could result in its delisting” from the Tokyo Stock Exchange, said Kazuhiro Takahashi, equity information chief at Daiwa Securities SMBC.

“We have the impression that somebody needs to take responsibility in order to move JAL’s restructuring plans forward. Worries are growing among shareholders,” he said.

Cabinet officials were expected to meet later on Wednesday to discuss JAL’s problems.

Local media have reported that the state-backed Enterprise Turnaround Initiative Corp., which is overseeing JAL’s restructuring, is considering the possibility of the carrier filing for protection from creditors.

Bankruptcy protection can enable a company to restructure its debts with creditors and implement other measures to emerge stronger, as seen with ailing US auto giant General Motors. But it can also mean that shareholders will see the value of their investment wiped out.

JAL, which lost about 1.5 billion dollars in the six months to September, has said it plans thousands of job cuts and a drastic reduction in routes as part of its efforts to return to profitability.

It has been offered financial assistance by both American Airlines and Delta Air Lines, who are competing to take a minority stake in the Japanese carrier, eyeing its coveted Asian landing slots.