Japan Air Bailout to Run Into 2010, Nishizawa Says (Update2)

Nov. 10 (Bloomberg) -- Japan Airlines Corp.’s application for financing from a state-affiliated fund won’t be decided upon before next year, the lender’s president said, delaying the carrier’s restructuring.

“Due diligence won’t be quick,” Hiroshige Nishizawa, president of Enterprise Turnaround Initiative Corp. of Japan, said in an interview in Tokyo yesterday. “We’re not going to be able to make a decision on whether to provide aid by the end of this year.”

JAL has applied for funds from Enterprise Turnaround as it heads for a fourth loss in five years on plunging international travel. The carrier may also get 100 billion yen ($1.1 billion) in bridging loans from three major lenders, including the Development Bank of Japan, the Mainichi newspaper said today, without saying where it obtained the information.

“JAL needs money by the end of this year,” said Yasuhiro Matsumoto, an analyst in Tokyo at Shinsei Securities Co. “Private institutions will probably have to lend it some.”

Development Bank will provide a bridging loan to the carrier, Transport Minister Seiji Maehara told reporters in Tokyo today. He didn’t elaborate.

The government may also temporarily waive JAL’s landing fees, the Yomiuri newspaper said today, without citing anyone. The carrier spends about 100 billion yen a year on the fees, the report added.

New Plan

Enterprise Turnaround will draw up a new plan for Tokyo- based JAL, instead of relying on one completed by a government- appointed taskforce last month, said Nishizawa, a former head of Tokyo Tomin Bank Ltd. The due-diligence team will be decided upon “soon,” he added.

Enterprise Turnaround was set up last month by the government and private companies with 1.6 trillion yen to help restructure companies and buy assets.

JAL fell 0.9 percent to 105 yen in Tokyo trading today. The stock has slumped 50 percent this year, the biggest decline in the Nikkei 225 Stock Average.

The government created a taskforce to develop a plan for JAL after the transport minister said President Haruka Nishimatsu’s proposal to cut 6,800 jobs and slash routes didn’t go far enough.

The carrier, predicting a loss of 63 billion yen this fiscal year, is due to announce first-half earnings on Nov. 13.

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