JAL may separate good operations from bad for early restructuring

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TOKYO, Sept. 22 Kyodo -
The government and major creditor banks of Japan Airlines Corp. are examining
an option to separate the ailing carrier's profitable operations from those
making losses to accelerate its rehabilitation, sources close to the matter
said Tuesday.
They are also studying the possibility of using public money under a special
law to help strengthen JAL's financial standing and support its funding, they
added.
Dividing a struggling company's businesses into two is a corporate
restructuring scheme under which profitable operations and healthy assets are
transferred to a new entity while underperforming operations and loss-making
assets are retained by the company, which will determine debts and losses and
concentrate on rehabilitation work with bailout measures.
Earlier this year, U.S. auto giant General Motors Corp. used the scheme,
creating a new government-backed company, General Motors Co., while filing for
Chapter 11 bankruptcy.
The government and creditors consider the scheme as an option for JAL because
some of its creditors fear that the airline's financial standing could be worse
than it appears if latent losses such as those on depreciation of aircraft are
taken into account, the sources said.
Those creditors became cautious to extend additional financial help for JAL as
the company has yet to show a clear way out of its chronic state of deficit,
they added.
Industry critics say, however, it is yet to be seen if such a scheme would
actually become available for JAL. Some in the Democratic Party of Japan-led
government are questioning how far the government should be involved in a
private-sector company's rehabilitation, they say.
Hit by a slump in demand for passenger and cargo traffic at home and abroad
amid the global recession, Japan's largest airline incurred a group net loss of
63.19 billion yen in the year that ended March 31 and is expected to remain in
the red in the current business year through next March.
In the government-supervised rehabilitation process, JAL has submitted a draft
of its business improvement plan to an expert panel set up by the Ministry of
Land, Infrastructure, Transport and Tourism.
Under the plan, it seeks to eliminate 6,800 jobs and scrap a total of 50
domestic and international routes over the three years through March 2012.
Seiji Maehara, who became transport minister last week, plans to hold hearings
with JAL's officials and senior officials from the airline's creditor banks on
Thursday on the airline's rehabilitation.
==Kyodo