Japan Air May Lose 74 Billion Yen Tax Breaks in Bill

Japan Airlines Co., set to hold an initial public offering after a state-backed turnaround, may lose 74 billion yen ($941 million) of tax breaks under a bill set to be filed by the nation’s main opposition party.

The bill would change the rules for tax credits awarded against writedowns by companies that have received government support, Yasuhisa Shiozaki, a Liberal Democratic Party lawmaker, said at a party meeting In Tokyo yesterday. The change would wipe out 74 billion yen of JAL’s tax credits, he said. He didn’t say how many credits the carrier holds.

“This is a risk factor for JAL’s IPO,” Shiozaki told reporters. The bill will be filed in the next few days and the party will aim to enact in the next session of parliament, which may start in October. The LDP is about level with the ruling Democratic Party of Japan in opinion polls ahead of elections that Prime Minister Yoshihiko Noda has pledged to call “soon.”

JAL may not have to pay tax for as long as nine years under existing regulations because of credits earned against writedowns, including ones made while in bankruptcy protection, the LDP said in June. The carrier is seeking about 663 billion yen in an IPO next month after a turnaround that helped transform the once loss-making company into the world’s most profitable airline.

The LDP bill is designed to “prevent the distortion of competition” in all industries, Shiozaki said. It’s not specifically targeted at the Tokyo-based carrier, he said. Hisanori Iizuka, a spokesman for JAL, didn’t immediately reply to a request for comment outside regular office hours yesterday.

Record Profit

JAL posted a record profit of 187 billion yen last fiscal year after shedding jobs, retiring planes and cutting loss- making routes. The carrier also benefited from a 35 billion yen tax break, according to the transport ministry paper distributed at a June LDP meeting. There wasn’t a forecast for the current fiscal year.

The company, which exited bankruptcy protection last year, expects net income of 130 billion yen in the year ending March 31. That’s more than three times the 40 billion yen forecast by All Nippon Airways Co., Japan’s largest carrier.

JAL’s assets shrank to 1.1 trillion yen as of March from 2.1 trillion yen in March 2008, according to data compiled by Bloomberg. The carrier filed for protection from creditors in January 2010 and delisted its shares the following month.

JAL intends to list on the Tokyo Stock Exchange on Sept. 19. Its government-backed owner, Enterprise Initiative Turnaround Corp. of Japan, will sell 175 million shares at a tentative price of 3,790 yen apiece, according to an Aug. 3 statement. A price range is due to be announced tomorrow.

ETIC, which invested 350 billion in JAL, will make a profit from the share sale, JAL’s Chairman Emeritus Kazuo Inamori said earlier this month. The carrier won’t raise any money in the IPO.

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

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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