Nov. 13 (Bloomberg) -- Japan Airlines Corp. is seeking loans of 125 billion yen ($1.4 billion) to maintain operations after posting a first-half net loss double the size of its previous full-year prediction.

Asia’s biggest airline by sales needs the funds by the end of March, Senior Vice President Yoshimasa Kanayama told reporters in Tokyo today. The carrier scrapped its full-year forecast after reporting a 131.2 billion yen first-half loss.

JAL will also seek out-of-court agreements to freeze debt payments as a state-affiliated fund considers supporting a turnaround amid plunging international travel. The carrier is in talks with both Oneworld partner American Airlines and Delta Air Lines Inc. of the rival SkyTeam group on possible investments.

“It’s a big mess,” said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, which manages about $3 billion in assets. “The talks with American and Delta are side issues. What they really need is cash from the government.”

The carrier expects to collect a loan by the end of the month, Kanayama said, without saying how much it would be for or who would provide it.

Standard & Poor’s cut its debt rating on the airline to CC, two grades above default. The ratings company has downgraded the Tokyo-based carrier by six grades in about a month.

JAL reported a first-half operating loss of 95.8 billion yen, compared with a 30.2 billion yen operating profit a year earlier. Sales slumped 29 percent to 763.9 billion yen. The airline previously predicted a net loss of 63 billion yen in the year ending March, its fourth unprofitable year in five.

“I feel a sense of responsibility very keenly,” said JAL President Haruka Nishimatsu. “We want to come up with a recovery plan that the public will understand.”

American, TPG

American is considering a $300 million investment in JAL with private-equity fund TPG Inc., according to a person familiar with the situation. The airline and Delta are talking to JAL as the U.S. and Japan prepare for negotiations on an ‘open skies’ agreement.

Applying for antitrust immunity on transpacific routes would be “easy” with American, JAL’s current partner, said Nishimatsu. The Japanese airline hasn’t made any decisions on antitrust applications, he added.

JAL fell 0.9 percent to 106 yen at the close of trading in Tokyo. The stock has slumped 50 percent this year, the biggest decline in the Nikkei 225 Stock Average. Earnings were announced after the market closed.

Creditors Talks

The airline plans to hold talks with creditors under Japan’s Alternative Dispute Resolution, or ADR, process. The airline is also axing 16 routes, negotiating possible cuts to pension payments and shedding staff.

“ADR is just a temporary solution,” said Yasuhiro Matsumoto, an analyst in Tokyo at Shinsei Securities Co. It will “bridge the gap until the government-affiliated agency’s decision on whether to help the company.”

State-affiliated Enterprise Turnaround Initiative Corp. of Japan President Hiroshige Nishizawa said earlier this month that the fund won’t be able to complete due diligence on JAL this year.

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

Last Updated: November 13, 2009 06:09 EST