Japan Airlines 'may stop international flights'

[Tamizi Hj Tamby 1]

Uh-oh,this doesn't look good for JAL.What a bad news to start aviation industry in 2010.

 

Japan Airlines 'may stop international flights'

AFP - Friday, January 1

 

The Japanese government is discussing an option to strip debt-ridden Japan Airlines (JAL) of its international operations to enable it to survive as a domestic carrier, a newspaper reported on Thursday.

TOKYO (AFP) - – Japan Airlines (JAL) may stop flying international routes under a plan being discussed by the government to try to keep the debt-ridden company in the air, a report said Thursday.

 

The plan calls for rival All Nippon Airways (ANA) to take over JAL's international flights as part of what would be a drastic downsizing scheme for Asia's biggest airline, the Mainichi Shimbun newspaper said.

 

The scheme was apparently on the table when key cabinet officials, including Transport Minister Seiji Maehara, met on Wednesday to discuss JAL's rehabilitation programme.

 

The transport ministry has strongly opposed the plan to turn JAL into a domestic carrier despite growing calls for a drastic restructuring of its international operations where losses weigh heavily, the newspaper said.

 

"(JAL) will be a good company if it abandons international routes and concentrates on domestic flights," an unnamed JAL executive was quoted by Mainichi as saying.

 

Immediate confirmation of the report was not available.

 

In a related move, Maehara held talks with vice Prime Minister Naoto Kan and other officials Thursday and agreed that the state-run Development Bank of Japan will offer further loans to JAL.

 

The DBJ has already disbursed just over half of a 100 billion yen (1.08 billion dollar) credit line extended in November. "On top of the remaining 45 billion yen, (DBJ) is to expand the limit," Maehara told reporters.

 

Cabinet officials said they would discuss details of further loans to JAL on Sunday before making an official announcement, while local media reported that DBJ is likely to double its credit line to 200 billion yen in total.

 

JAL, battered by the global recession and swine flu pandemic, is scrambling to slash costs and is seeking its fourth government bailout since 2001 to keep flying in the face of mounting losses.

 

Shares plunged to a record low on Wednesday as media reports that bankruptcy is one option for the cash-strapped carrier spooked investors.

 

The Tokyo stock market was closed for a holiday on Thursday.

 

Local media have reported that the state-backed Enterprise Turnaround Initiative Corp., which is overseeing JAL's restructuring, is considering the possibility of the carrier filing for protection from creditors.

 

It has also been offered financial assistance by both American Airlines and Delta Air Lines, who are competing to take a minority stake in the Japanese carrier, eyeing its coveted Asian landing slots.

 

JAL, which lost about 1.5 billion dollars in the six months to September, has said it plans thousands of job cuts and a drastic reduction in routes as part of its efforts to return to profitability.

 

The global economic downturn has dealt a heavy blow to JAL's efforts to recover from a long period of financial turbulence stretching back to its privatisation more than two decades ago.

[Seth K 3]

to start with, JAL has very expensive fare!

 

to start with, JAL has very expensive fare!

[Izanee 0]

that is indeed awful news. never realised that i would see so many legacy airlines go bust in my lifetime!

Pan Am, Sabena, Swissair etc etc.

[Waiping 12]

 

Can JAL survive with only domestic flight? Surprising to see this consideration their rival from KIX - ANA is doing quite well IIRC.

Edited January 1, 2010 by Waiping

[C.Foo 3]

If anybody watches the Nikkei ever since DL-JL roumers the nikkei has be falling like the london bridge (song). That is why on 31st the Nikkei closed. Because of JAL Anyhow if Air Nippon takes over NH doesn't even have the amount of planes needed and crew plus maintence.

[SC Chow 0]

Will it happen on MH someday in the future if current condition turns worse?

[C.Foo 3]

I think it will follow Garuda as MH position is what garuda was in the 90's

 

Will it happen on MH someday in the future if current condition turns worse?

[S V Choong 4]

to start with, JAL has very expensive fare!

Not entirely! They have special deals from time to time. For example, on the SIN-KUL route, they are amongst the cheapest!

 

Flights in and out of Japan are much more expensive than rest of the world.

[Seth K 3]

Not entirely! They have special deals from time to time. For example, on the SIN-KUL route, they are amongst the cheapest!

 

Flights in and out of Japan are much more expensive than rest of the world.

I have to agree with KUL-SIN fare, once I got 80USD fare

Most of the time if I compare with other carriers, their US flight to Asia via Japan is extremely expensive + their products in Y is not that great IMO.

[Isaac 0]

Can JAL survive with only domestic flight? Surprising to see this consideration their rival from KIX - ANA is doing quite well IIRC.

NH is actually based in TYO, just like JL.

[S V Choong 4]

It was a public holiday in Japan on the 31 December 2009, the last day of the year is being observed as a holiday AND PRECISELY, that was the reason why Nikkei was closed. Obviously it seems you know very little about Japan. Just because it is NOT a public holiday in the country you live in, it does not mean it is not a public holiday anywhere else.

 

I do not know where you get your facts from, obviously it is not true.

.............

 

It was a public holiday in Japan on the 31 December 2009, the last day of the year is being observed as a holiday AND PRECISELY, that was the reason why Nikkei was closed. Obviously it seems you know very little about Japan. Just because it is NOT a public holiday in the country you live in, it does not mean it is not a public holiday in Japan. (FYI, Christmas is not even a public holiday in Japan).

 

I do not know where you get your facts from, obviously it is not true.

Edited January 2, 2010 by S V Choong

[KK Lee 5]

JAL is the flag carrier, after he gomen have decided how to handle its debt, it will be reborn like Swiss Air.

 

[KK Lee 5]

Japan Airlines files for bankruptcy protection

 

JAL is now valued at less than the price of a new jumbo jet

 

Japan Airlines (JAL), Asia's biggest air carrier, has filed for bankruptcy protection, in one of the country's biggest corporate failures.

 

Some 15,000 jobs are expected to be cut. All board members have also voted to resign, according to Japanese media.

 

A state-backed turnaround organisation has said it plans to inject about 300bn yen ($3.3bn; £2bn) into JAL.

 

Japan's government says flights will continue as normal as the airline begins restructuring.

 

Its reorganisation will take place under the supervision of the state-backed Enterprise Turnaround Initiative Corporation (ETIC).

 

JAL will also receive a 600bn-yen credit line and get 730bn yen in debt waivers.

 

JAL shares have fallen to an all-time low, valuing the firm at just $150m - less than the price of a new jumbo jet.

 

The Tokyo Stock Exchange said shares in the carrier would be delisted on 20 February.

 

Along with other major global airlines, JAL has been hit hard by falling passenger numbers during the global economic downturn. The carrier has debts of $25.6bn.

 

Investors to lose out

 

"Basically this shows that nothing is too big to fail, that America's GM and Japan's JAL were in the same situation," said Koichi Ogawa from Daiwa SB Investments.

 

STORY SO FAR...

 

Founded in 1951, Japan's flagship carrier came to symbolise the country's rapid economic growth, leading to privatisation in 1987

But when Japan's stock market and property bubble of the 1980s burst, it was hurt by risky investments it had made in foreign resorts and hotels

It also found itself with growing pension and payroll costs, and running many unprofitable domestic routes, which it was politically obliged to maintain

More recently, it has seen falling passenger numbers in the global downturn, and as a result of increased competition from Japanese rival All Nippon Airways

It lost 131bn yen ($1.4bn; £880m) in the six months to September

 

 

"What this has shown is that the nation won't just take total care of a company, that they've now said they'll let badly-run companies fail."

 

A third of JAL's workforce face the prospect of losing their jobs, the BBC's Roland Buerk in Tokyo says.

 

While the turnaround plan backed by the government will see the airline continue to fly, investors in the company are likely to lose most of their money.

 

But JAL's competitors would only see a limited impact from its bankruptcy filing, Kazuyuki Terao, chief investment officer at RCM Japan, said.

 

"If consumers shift to other carriers, it might have a positive impact but it is also not likely because for consumers, utility is important - which will not change after bankruptcy."

 

Support

 

Meanwhile, US carrier Delta Air Lines has issued a statement of support for JAL.

 

Delta wants JAL to leave the OneWorld Alliance and join its SkyTeam partnership.

 

"Delta and SkyTeam fully support Japan Airlines and stand ready to provide assistance and support in any way possible.

 

"Delta fully expects that JAL, with the support of ETIC, will be successful in its restructuring and return the airline to a position of prominence."