Thursday, October 22

Japan Airlines’ shares soar on credit lifeline


TOKYO: Japan Airlines’ (JAL) shares skyrocketed on Monday after the government agreed to expand a financial lifeline to the troubled carrier, easing fears that it might file for bankruptcy.JAL stock ended up 31.3 per cent at 88 yen, off a high of 93, as investors welcomed Tokyo’s decision at the weekend to double a state-backed loan to Asia’s largest carrier to 200 billion yen (US$2.2 billion).

“There was talk about the company’s operating funds drying up unless it secured a bigger credit line by January. I suppose that worry eased,” said Makoto Sengoku, a market analyst at Tokai Tokyo Securities.

But concern lingered that JAL might eventually file for bankruptcy protection to aid its restructuring — a development that would be likely to leave investors out of pocket.

JAL’s future “is still uncertain,” Sengoku said.

Shares in the airline had nose-dived almost 24 per cent on Wednesday, the final trading day of 2009, hitting a record low at one point after local media reported that bankruptcy was a possibility for the beleaguered airline.

The market jitters come as JAL seeks to pull itself out of deepening financial misery by reducing international flights, cutting pension payments to retirees and tying up with a foreign carrier.

JAL has been offered financial assistance by both American Airlines and Delta Air Lines, which are competing to take a stake in the Japanese carrier as a way to expand into the Asian market.

The Yomiuri Shimbun daily reported in its online edition yesterday that JAL had decided to forge a capital tie-up with Delta Air Lines and join the SkyTeam global alliance, leaving the OneWorld group, which includes American Airlines.

JAL denied the report, saying it was still in negotiations with the two US carriers.

“There is no such fact that we have decided on Delta. We’re continuing talks with both American and Delta,” a company spokesman told AFP.

JAL, battered by the global recession, is seeking its fourth government bailout since 2001 in the face of mounting losses.

As a temporary stopgap, cabinet ministers agreed Sunday on an increased credit line from the state-backed Development Bank, seeking to soothe investors’ fears before the market reopened for the new year.

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

The body is expected to decide on a financial package for the carrier in mid-January.

JAL president Haruka Nishimatsu told local media that he was opposed to any bankruptcy filing.

“Legal liquidation gives an image that will affect us and reduce the number of our clients,” he said in an interview with the Asahi Shimbun daily published on Sunday.

The airline, which lost about US$1.5 billion 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.

JAL has suffered a long period of financial turbulence stretching back to its privatisation more than two decades ago. —AFP