Japan Airlines 'to file for bankruptcy and cut 15,600 jobs'

Japan Airlines is to shed 15,600 jobs and shun a capital alliance with US carriers as part of restructuring plans that could see it file for bankruptcy as early as next week. Reports in the Japanese media said that Asia's biggest airline would cut a third of its workforce over three years. After weeks of mounting confusion over its future, it now appears that JAL will file for bankruptcy protection under Japan's corporate rehabilitation law, a process similar to Chapter 11 in the US. In what would be the sixth-biggest bankruptcy in Japanese history, the state-backed turnaround group responsible for engineering JAL's revival would inject ¥300bn (£2bn) in new capital, provided the airline filed for bankruptcy and its financial backers agreed to waive ¥350bn in debts. JAL's major creditors, which include the state-owned Development Bank of Japan and the "megabank" Mitsubishi UFJ financial group, were owed ¥429bn at the end of March. Speculation is mounting that JAL's shares will be de-listed, although officials at the Enterprise Turnaround Initiative Corporation [ETIC] say they have yet to reach a decision. According to Kyodo News, the ETIC will also guarantee more than ¥470bn to cover fuel and other commercial transactions after JAL goes into administration. The body reportedly wants JAL to reject rival offers of fresh investment from Delta and American Airlines, as it believes a new capital alliance could complicate the restructuring plans. Delta, the world's biggest airline, has offered $1bn (£620m) to entice JAL to the Sky Team alliance. American, which along with JAL is part of the Oneworld alliance, has countered with $1.4bn. Although the ETIC is likely to reject the new investment, it will reportedly leave JAL's new management to reconsider the offers at a later date. The US airlines are keen to exploit JAL's huge Asian network and strengthen their presence in Japan ahead of the expansion of Haneda airport in Tokyo in October. "Delta continues to be in discussion with JAL about forming a long-term strategic partnership," a Delta spokeswoman told Reuters. "Details of those discussions are confidential." The government is expected to announce its final decision this week, with bankruptcy procedures to follow a week later. Kazuo Inamori, the founder of the electronic component maker Kyocera, is being lined up to replace current JAL president and chief executive Haruka Nishimatsu, who has agreed to step down. The refusal by Japan's new government's to grant JAL unrestricted loans marks a significant departure from the approach of previous administrations led by the Liberal Democratic party, which approved several emergency loans between 2001 and last year. Inamori is thought to be ideally suited to steering JAL through the most precarious period in its 59-year history. The 77-year-old, who turned Kyocera into a technology powerhouse with an initial investment of just ¥3m in 1959, is close to the Democratic party of Japan, which ousted the LDP last September, and sits on a government panel set up to eliminate wasteful spending. JAL, whose liabilities exceed its assets by more than ¥860bn, is bracing for estimated operating losses of ¥265bn for the year to the end of March. Last year it amassed losses of ¥51bn. The airline's shares have fallen from ¥213 to ¥67 since the beginning of 2009.