JAL's Huge IPO May Face Bumpy Skies: The Ticker

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By William Pesek

In the annals of contrarian thinking, the folks at Japan Airlines Co. may deserve a prominent mention.

Europe is crashing, China's bubbles are deflating, America is walking in place and Japanese growth is slowing anew. Undaunted, the carrier that exited bankruptcy last year plans an initial public offering of as much as $13 billion as early as September, Takahiko Hyuga of Bloomberg News in Tokyo reported.

Is 2012 the best time to attempt what could be the biggest IPO worldwide since General Motors Co. in 2010? Hardly. Concerns about France losing its AAA rating are hovering over markets. Once that eventually occurs, traders will test the resolve of euro-zone officials as never before. Europe's crisis would be less worrisome if other economic engines existed to pick up the slack. All this adds up to a turbulent environment for JAL.

Credit where it's due: Since its delisting in February 2010, JAL worked hard at restructuring. It cut a third of its staff, shed planes and axed loss-making routes.

Interestingly, though, JAL is a microcosm of what's ailed Japan for 20 years. It's long been a bloated, uncompetitive, over-indebted, expensive, shareholder-unfriendly company -- not unlike Japan's entire economy. Even if JAL has been reborn, as its executives claim, it will operate amid weak consumer demand, deflation, an aging population and price wars with budget airlines popping up all over Asia.

It's great that JAL expects to make a profit this fiscal year. Yet its bankruptcy followed three losses in four years that were caused by competition from All Nippon Airways Co. and a slowdown in global air travel. If anything, those challenges grew worse while JAL was restructuring with, it should be said, the help of four state bailouts in nine years.

JAL reportedly plans to submit its IPO filing to the Tokyo Stock Exchange in July. Let's hope the world economy is gaining some altitude by then. It may very well be losing it.

(William Pesek is a Bloomberg View columnist.)

-0- Jan/05/2012 16:08 GMT