Japan Airlines Wins U.S. Bankruptcy Court Protection (Update1)

Feb. 17 (Bloomberg) -- Japan Airlines Corp. won U.S. court protection while it reorganizes through its main bankruptcy case in Tokyo.

U.S. Bankruptcy Judge James Peck in Manhattan today granted the Tokyo-based airline Chapter 15 protection in Manhattan court, giving Japan Air a shield against U.S. lawsuits and helping it to organize U.S. creditors’ claims.

“There have not been any material or business disruptions,” to Japan Air’s business since the company began restructuring in its home country, lawyer David Seligman told Peck. There were no objections to the bid for U.S. court protection.

In operation since 1951, Japan Airlines is the largest domestic carrier in Japan and filed the country’s fourth-biggest bankruptcy.

The company’s Jan. 19 filing in Tokyo District Court sought creditor consent for a debt restructuring plan, Eiji Katayama, a foreign representative of the company, said in court documents filed in Manhattan.

Under Chapter 15, U.S. lawsuits can be put on hold and U.S. creditors can be bound by the terms of a company’s main restructuring proceeding in a foreign court.

Seligman also told Peck a deal with AMR Corp.’s American Airlines won’t be brought to the bankruptcy court for review.

Japan Airlines has said it will maintain its partnership with AMR, rejecting an offer from Delta Air Lines Inc.. AMR and Japan Airlines have also asked the U.S. government for protection from antitrust prosecution, a move that would let them deepen their partnership on Asian routes.

American and Delta, the world’s two biggest carriers, have both offered to invest in JAL as the U.S. and Japan move toward liberalizing air travel between the two nations.

The case is In re Japan Airlines Corp., 10-10198, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net