Raw Japan

Slices of Japanese business, politics and life

Going for broke?

January 12, 2010

Another love so true
That once turned all my gray skies blue
But you disappeared
Now my eyes are filled with tears
K. Sakamoto

Japan Airlines appears set to enter the hangar of court protection with $16 billion in debt, equal to a one-way Tokyo-Sapporo ticket for every citizen. The move would not be the most momentous  for Japan or for a global carrier in the age of deregulation, but it would be one of the most well-telegraphed.

JAL/

JAL shares were toxic and untraded early on Tuesday, after a state-backed fund in charge of restructuring said it was leaning towards delisting after a bankruptcy. A source at the Enterprise Turnaround Initiative Corp of Japan told Reuters it intends to hold shareholders accountable, but with losses of over 45 percent since Friday and over 80 percent since Jan. 5 last year, many would contend they’ve already felt the carrier’s pain.

The government will soon explain to 35 nations JAL’s flight plan.

Asia’s largest airline by revenue has convinced major banks to sign off on bankruptcy, but eyes remain on its alliance plans and  international air routes. Media reports say JAL will likely receive no capital injection from any carrier or alliance, but may launch new ties with Delta Air Lines’ SkyTeam alliance, a possible stiff-arm to its current alliance as American Airlines’ officials circled in Tokyo with bigger offers on Tuesday.

The government says it will keep JAL airborne through the entire process, but losses are estimated at $13 billion for the current year, meaning a negative net worth of almost $9 billion and the need for some sort of reasonably rapid credit infusion.

Current JAL chief  Haruka Nishimatsu will likely leave once a bailout is underway, and his successor, now expected to be 77-year-old Kyocera honorary Chairman Kazuo Inamori, faces a daunting task, although not the most harrowing in JAL’s history.  That would be August 1985, when a domestic aviation disaster left 520 dead, including the “Sukiyaki” (“Ueo Muite Arukou”) singer Kyu Sakamoto, a tragedy eroding confidence in the national flag carrier as invulnerable and raising questions about public good faith.

JAL’s story is far from over, but a new chapter in its corporate history will begin soon, likely without investors and the current mountain of debt, except that of the government.

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