Japan Air Creditors Back $10 Billion Turnaround Plan
Kazuo Inamori, CEO of JAL
Toshiyuki Aizawa/Bloomberg
Kazuo Inamori, chairman and chief executive officer of Japan Airlines Corp. (JAL), right, attends a news conference with Masaru Onishi, president and chief operating officer, in Tokyo.
Kazuo Inamori, chairman and chief executive officer of Japan Airlines Corp. (JAL), right, attends a news conference with Masaru Onishi, president and chief operating officer, in Tokyo. Photographer: Toshiyuki Aizawa/Bloomberg
Japan Air Creditors Back $10 Billion Turnaround Plan
Robert Gilhooly/Bloomberg
Japan Airlines Corp. agreed with lenders on an 872 billion yen ($10 billion) turnaround plan that waives about a quarter of debt, cuts jobs and grounds planes.
Japan Airlines Corp. agreed with lenders on an 872 billion yen ($10 billion) turnaround plan that waives about a quarter of debt, cuts jobs and grounds planes. Photographer: Robert Gilhooly/Bloomberg
Japan Airlines Corp., Asia’s most indebted carrier, agreed on an 872 billion yen ($10 billion) turnaround that waives 88 percent of unsecured liabilities, cuts jobs and grounds planes in a bid to exit bankruptcy.
Creditors will forgive 522 billion yen of debt, and a state-affiliated turnaround fund will inject 350 billion yen of fresh capital, the carrier said in a statement today. The Tokyo District Court, which is overseeing the airline’s restructuring, still needs to approve the plan.
Chairman Kazuo Inamori, who took over in February, today said he wants to finish guiding the company out of bankruptcy within two years of his starting date. Japan Air said it will cut about 16,000 jobs, halt service on 49 routes and ground 103 aircraft to reduce costs. Inamori, 78, founded electronics maker Kyocera Corp. and was named by the government to oversee the company’s turnaround.
“The job cuts should help persuade private lenders to lend money to the carrier again,” Yasuhiro Matsumoto, an analyst in Tokyo at Shinsei Securities Co., said before the announcement. “JAL needs more money to buy new aircraft and scrap old, inefficient planes.”
Unprofitable Routes
Japan Air, which had maintained services on unprofitable routes to little-used airports around the country, was forced to seek bankruptcy protection with 2.32 trillion yen of liabilities after a global recession slashed travel demand. It delisted from the Tokyo Stock Exchange in February.
The company may apply to sell shares by March 2012, said Hideo Seto, chairman of the Enterprise Turnaround Initiative Corp. of Japan committee overseeing the effort. Two problems still facing the carrier are refinancing the remaining debt and managing risks to travel demand such as economic downturns and airborne diseases, Seto told reporters.
The carrier aims to refinance the remaining debt around March next year, Seto said.
JAL also forecast an operating profit of 64.1 billion yen for the year ending March 2011. Operating profit will probably gain to 75.7 billion yen next fiscal year, the company said.
President Masaru Onishi today said the company will also study prospects for starting a low-cost carrier.
Biggest Lenders
JAL’s four biggest lenders at the end of March 2009 were Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc., Mizuho Financial Group Inc., and the Development Bank of Japan. They were owed a total of 429 billion yen.
Under the initial plan released in January, JAL said it would phase out 37 Boeing Co. 747-400s and 16 MD-90s during the restructuring. The carrier had a fleet of 278 planes at the end of March. The airline has ordered 35 Boeing 787s, which are 20 percent more fuel efficient than similar planes, according to Boeing.
To contact the reporters on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net
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