Japan Govt to Fully Support JAL Turnaround

Tokyo, Oct. 29 (Jiji Press)--The Japanese government offered its full support Thursday for the rehabilitation of struggling carrier Japan Airlines <9205> under a process led by a new government-backed corporate turnaround body.

Transport minister Seiji Maehara instructed JAL the same day to
seek assistance from Enterprise Turnaround Initiative Corp. of Japan (ETIC),
which began operations earlier this month.
"Japan's economy would be severely damaged if JAL planes were to
stop flying," Maehara said at a press conference, stressing the government's
intention to support the firm's turnaround.
Maehara made the announcement after receiving a report on proposed
rehabilitation schemes from a special task force of outside experts set up
by the minister.
Subsequently, JAL President Haruka Nishimatsu officially requested
support from the turnaround body.
JAL will receive advice from ETIC and undergo the organization's
scrutiny of its assets in order to draw up by the year-end a program for
reconstructing its tattered operations and finances.
If ETIC decides to accept JAL's request for help, the airline would
likely be in a stronger position when seeking public funds for
recapitalization and holding debt waiver talks with its creditors.
The government will take steps to alleviate concerns about JAL's
creditworthiness while monitoring the firm's rehabilitation process.
To achieve this, the government will set up a team made up of
representatives from ministries concerned, including the transport ministry.
At a cabinet meeting on Friday, the government will also decide how
to address the company's immediate funding needs.
In light of strong calls for cuts in massive benefits provided to
the company's retired and current employees, the government is expected to
consider drafting a special law allowing compulsory cuts in its corporate
pension benefits.
Maehara's task force is believed to have concluded that JAL is
effectively in negative net worth.
The team also believes that the firm needs to take in bridge loans
worth nearly 200 billion yen by the end of November, and cut its
interest-bearing debts totaling 700 billion yen and reinforce its capital
base by the end of March 2010.
On the ground that these financial support measures are provided,
JAL should be able to turn itself around if the firm downsize its
organizational structure, cut the number of its aircraft and routes, and
slash its legacy costs, the task force said in a report to Maehara.
Now that the team has completed its mission, the baton will be
passed to ETIC.
JAL creditors generally welcomed the government's plan to use ETIC
for the firm's revival. A megabank official said the government's
involvement will help increase the probability of successful rehabilitation.
But one industry source showed concerns that creditors may be
requested to forgive greater amounts of loans than have been requested so
far.