Nov. 23 (Bloomberg) -- Japan Airlines Co. chose Mitsubishi UFJ Financial Group Inc., Credit Saison Co. and three other financial firms as preferred bidders for a stake in its credit card unit, Kyodo News reported.

The Tokyo-based airline, Japan's second-largest domestic carrier, will hold a second screening to pick a buyer for JALCard Inc. by the end of March, Kyodo said, citing people familiar with the selection process it didn't identify.

Japan Airlines, Asia's most indebted carrier, may sell a majority stake in the card unit, Kyodo said. The report did not name the three other companies on the short list. Calls to the Japan Airlines public relations office went unanswered. A call to the company's general number was answered by a recording. Today is a national holiday in Japan.

President Haruka Nishimatsu is selling businesses unrelated to aviation to cut Japan Airlines' debt by 12 percent this fiscal year. JALCard customers spend an average of 860,000 yen ($7,970) a year, making them attractive to domestic banks that face increasing competition from Citigroup Inc. and HSBC Holdings Plc.

Mitsubishi UFJ, Japan's largest publicly traded bank, Sumitomo Mitsui Financial Group Inc. and Credit Saison may submit bids for JALCard, people with knowledge of the transaction said in October. Credit Saison, which has 26 million cardholders and a market value of 587 billion yen, plans to ally with Mizuho Financial Group Inc. to bid for the unit, they said.

JALCard may sell for as much as 100 billion yen, Yasuhiro Matsumoto, an analyst at Shinsei Securities Co., has estimated.

Shares of the airline climbed to a 16-month high on Nov. 7 after Japan Airlines reported a 63 percent surge in operating profit for the second quarter and raised its full-year operating profit forecast by 37 percent. The carrier said it flew more business-class passengers in Asia, accelerated job cuts and abandoned low-margin routes.

Japan Airlines fell 4 percent to 261 yen yesterday in Tokyo.

To contact the reporter on this story: Mari Murayama in Tokyo at mmurayama@bloomberg.net

Last Updated: November 22, 2007 21:56 EST