JAPAN AIRLINES (JAL) has filed for court protection with estimated liabilities of more than $22 billion.
The bankruptcy – one of the largest in Japan’s postwar history – is expected to kick-start a painful three-year restructuring process, with up to 15,000 job losses, billions in debt write-offs and the loss of dozens of unprofitable routes.
Analysts say the former state-owned carrier will need up to $7 billion in debt wavers and billions more in credit if it is not to collapse completely, with a calamitous impact on its 13,000 business partners.
Pledging that the airline would continue flying, prime minister Yukio Hatoyama called on JAL’s beleaguered employees to swing behind its restructuring, which will be supervised by the state-backed Enterprise Initiative Turnaround Corporation.
“What’s most important is that all people who are working [for JAL] devote all their energies toward its restructuring . . . On that premise, the government will support their efforts,” he said.
JAL president Haruka Nishimatsu, who opposed the bankruptcy, was the first from the airline’s board to resign yesterday. Local media report that his replacement is Kazuo Inamori (77), founder of manufacturing giant Kyocera and one of Japan’s most revered entrepreneurs.
Admitting that he was “old” and found full-time work difficult, Mr Inamori, who is a fully ordained Buddhist monk, nevertheless promised help pull the company back from the brink. “I don’t know anything about the transportation industry, but I would like to make my best contribution.”
Increasingly losing out to its once lowly but fleet-footed domestic rival All Nippon Airways, JAL’s fall accelerated after the global financial crisis began in 2008.
Its shares traded on the Tokyo Stock Exchange yesterday for as low as three yen apiece and its market value eventually plunged to just $150 million – less than the cost of a single aircraft. The company is scheduled for delisting on February 20th.
The combined 2.3 trillion yen liabilities of the JAL group, including Japan Airlines International and JAL Capital, make it Japan’s largest non-financial-sector bankruptcy since the second World War, Kyodo News reported.
Transport minister Seiji Maehara admitted the company’s sheer size had temporarily saved it from the abyss. “If JAL was not the biggest airline company, it would have been liquidated.”
Mr Maehara’s centre-left Democrat government has ordered a tough turnaround plan, including the loss of about a third of JAL’s workforce and the scraping of politically important but unprofitable domestic routes.
Rescued three times from bankruptcy by the previous government in the last decade, JAL is now facing the moment of truth, say many analysts. The Democrat’s tough medicine is being widely seen as another sign that the days when some companies in Japan were considered too big to fail are now over.
