Bankruptcy Fears Affecting Japanese Airline

Submitted by Jen Jones on Sun, 01/03/2010 - 8:56pm

Bankruptcy Fears Affecting Japanese Airline

Like many airlines in the United States, Japan Airlines Corporation has been struggling, possibly since the company was privatized more than twenty years ago. Stock for the nearly 60 year old company and the flag carrier for Japan hit a record low on Wednesday as fear that the company would soon be undergoing restructuring as part of a bankruptcy filing. At one point during trading the stock had sunk as much as 32% from the starting price for the day.

To avoid a bankruptcy the airline is trying to do what it can to cut operating costs as it attempts to recover from the global recession. JAL claims that it lost $1.5 billion just from April through September of 2009. Executives plan on cutting routes and jobs in the near future. Retirees may soon see their pensions reduced as the company tries to cut costs wherever it can.. The company is also seeking its fourth government bailout this decade.

Reports from Japanese news sources say that a group backed by the government aimed to aid in corporate turnaround had recommended that creditors allow the airline to begin the process of entering bankruptcy proceedings. However, it has also been reported that the creditors have rejected the proposal. They are afraid that losses would only continue to increase and that operations may not continue to operate smoothly. A final plan to help the airline is supposed to come from the corporate turnaround committee by the end of January.

Some well known airlines are trying to extend their Asian service by gaining an interest in the troubled company. Currently, JAL is part of the one world alliance with American Airlines. Delta has been trying along with its partners to lure Japan Airlines away from American by offering it $1 billion.

Government officials say that they cannot allow the airline to fold, but have not ruled out allowing it to seek relief through filing for bankruptcy.

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