JAL seeks public funds, but gov`t says turnaround plan insufficient

TOKYO, Sept. 24 Kyodo -
Japan Airlines Corp. President Haruka Nishimatsu said Thursday that he had met
with transport minister Seiji Maehara and asked for the injection of public
funds to boost JAL's financial standing to enable it to push through drastic
restructuring measures.
But Maehara told reporters after the meeting that the government would not
immediately grant approval for fresh money, rapping JAL's business improvement
plan as ''still insufficient in terms of specifics and feasibility.''
''We have a plan in mind after having the hearing,'' Maehara he said. ''Time is
limited so I will discuss with the prime minister and reach a conclusion as
quickly as possible.''
Although Nishimatsu did not disclose the amount sought, Japan's top airline
plans to apply for funds from the state-owned Development Bank of Japan under
an emergency financial aid program set up by the government to support
non-financial companies hit by the global economic downturn.
The chief executive of the struggling carrier reported to Maehara, who was
appointed minister of land, infrastructure, transport and tourism last week, on
the restructuring plan being drafted by JAL.
Earlier this month, JAL submitted a draft plan to an expert panel set up under
the previous administration. In the draft, JAL said it would cut 6,800
employees, or around 14 percent of its group workforce, and scrap a total of 50
domestic and international routes over the three years through March 2012.
''We submitted stepped-up cost-cutting measures,'' Nishimatsu told reporters
after the meeting but declined to provide details, which are likely to include
cuts in pilot wages and other personnel costs.
''I was not convinced today,'' Maehara told reporters, adding he was skeptical
whether JAL can actually carry out the measures in the given three-year
timeline.
Following talks with JAL's top executives, the minister also met with officials
from the Development Bank of Japan and creditor banks, including Mitsubishi UFJ
Financial Group Inc. and Mizuho Financial Group Inc., who also expressed doubts
about extending more loans to JAL with the current plan, according to Maehara.
But the minister denied media reports earlier in the week that the government
and major creditor banks of JAL are considering splitting the company into
profitable operations and loss-making businesses to accelerate its
restructuring.
''We are not considering anything other than for JAL to rebuild on its own,''
he said, ruling out the possibility of bankruptcy proceedings or the breakup
scheme.
Whether the loss-making carrier will receive support under the emergency
government program remains uncertain, with some ministry officials questioning
whether the economic recession is the root cause of JAL's current financial
woes. The government's program is primarily aimed at rescuing companies hit by
the financial crisis.
''The impact of the financial crisis is not the only cause'' of the erosion of
JAL's earnings, a senior official at the transport ministry said.
But Nishimatsu emphasized that the company had returned to profitability before
being pounded by the financial recession, saying JAL can ''sufficiently clear''
the conditions for receiving the emergency funds.
So far, only Japanese chipmaker Elpida Memory Inc. has received public funds
under the corporate rescue program.
JAL earlier inked a deal to borrow a total of 100 billion yen from two
state-backed lenders and three major Japanese commercial banks in the latest
among a series of de facto public bailouts for JAL.
The firm is also discussing receiving capital investment with two of the
world's largest air carriers -- Delta Air Lines Inc. and American Airlines Inc.
-- as well as other foreign airlines.
Combined with the various foreign capital tie-ups under negotiation, JAL plans
to raise another 100 billion yen by allotting shares to client firms including
trading houses and travel agencies as well as investment funds.
JAL incurred a larger-than-expected group net loss of 99.04 billion yen in the
April-June quarter and is anticipating a second consecutive year of heavy
losses for the full business year through next March with travel demand hit by
the economic downturn and the new influenza.
==Kyodo