Japan Air Lines files for Bankrupty

[t951]

Wow....

Japan Airlines files for bankruptcy | Business | guardian.co.uk

Japan Airlines today filed for bankruptcy in an attempt to reverse the fortunes of a once-revered corporate icon now saddled with billions of dollars of debt and a reputation for mismanagement and inefficiency.

The airline's board decided to place the company at the mercy of a state-led restructuring plan that will require it to shed almost 15,700 jobs and cut more than 30 unprofitable routes.

JAL said its entire board would resign but added that the airline would continue flying even as it files for protection from creditors under Japan's version of Chapter 11 in the US.

The airline will receive support from the state-backed Enterprise Turnaround Initiative Corporation [ETIC], which will provide ¥300bn (£2bn) in fresh capital and a ¥600bn credit line to cover payments for essentials such as fuel and parts.

Asia's biggest airline cited combined debts of ¥2.3 trillion, making the bankruptcy one of the biggest in Japanese history. Its creditors, which include three Japanese "megabanks," will forgive ¥730bn in debts, far higher than previously estimated.

The news ended weeks of speculation over JAL's future after Japan's new centre-left government ruled out an emergency bailout.

The airline will, however, stay in business while it attempts to repair its battered reputation and return to profitability by the end of the 2012 financial year.

The government said it would "provide the necessary support for JAL until the completion of its rehabilitation".

JAL said it wished to "sincerely apologise to all of our shareholders, financial creditors, customers and suppliers and other parties concerned for the great inconvenience and concern this situation might cause".

Earlier in the day the firm suffered the indignity of seeing its shares sink to a record low of ¥3. Those shares will soon be worth nothing now that the Tokyo stock exchange has confirmed they will be delisted tomorrow.

A rosy future for JAL?

In exchange for financial backing from ETIC, JAL will slash a third of its 47,000-strong workforce by March 2013 and cut 14 international and 17 domestic routes over the same period.

JAL is expecting operating losses of ¥265bn for the year to the end of March, having amassed losses of ¥51bn last year. It lost ¥131.2bn in the six months to September.

Its long-term future will be dependent on efforts to emerge as a leaner airline, probably with support through new partnerships with overseas carriers that could transform the airline business in Asia-Pacific.

Analysts were upbeat about JAL's immediate future, but acknowledged that questions remain over its potential for growth.

"I am not worried about the future of the carrier as I believe the government will strongly support it," said Yasuhiro Matsumoto, a credit analyst at Shinsei Securities. "But whether it will be able to grow as a business is unclear. I can't see how JAL is going to build its network domestically and internationally."

The company, which has received four government bailouts since 2001, has seen its market value decline 90% since the beginning of the month. With a market value of £90m – less than the price of a Boeing 747 – the airline is now trailing the likes of Croatia Airlines and Jazeera Airways.

JAL's dramatic decline has proved a sobering experience for an airline that grew from a handful of leased planes in 1951 into a global fleet of 280 aircraft serving 220 airports in 35 countries.

In recent years it became a victim of its own success, making a series of risky investments while creaking under the weight of skyrocketing pension and salary costs.

It was subject to government pressure to serve unprofitable domestic airports, built for no other reason than to support the construction industry, in return for government bailouts during its periodic crises.

The airline will halve its subsidiaries, which include a hotel chain and credit card business, to give itself a fighting chance of recovery amid falling passenger numbers and volatile fuel prices.

Its first obvious break with the past was the appointment of Kazuo Inamori, the founder of the electrical components maker Kyocera, as chief executive.

A very different airline is expected to emerge under the stewardship of the 77-year-old Inamori, a trained Buddhist monk and self-confessed airline industry novice. Reports said it would have to retire 53 of its largest jets and replace them with smaller aircraft suited to domestic and regional flights.

JAL will also have to decide over rival offers of investment from two US airlines keen to boost their presence in east Asia,

American Airlines and its partners, including British Airways, say they are willing to invest $1.4bn (£850m) to keep JAL as part of their Oneworld alliance. But reports suggest JAL is preparing to accept a rival offer worth about $1bn from Delta and defect to its Sky Team group.

Delta estimates a switch to Sky Team would increase JAL's revenues by $400m a year and give the two airlines a 43% share of the market between Japan and North America.

[trekkor]

JAL has dormitories in Napa and a training center at the airport.


KT

[legion]

Originally Posted by t951

The company, which has received four government bailouts since 2001, has seen its market value decline 90% since the beginning of the month. With a market value of £90m – less than the price of a Boeing 747 – the airline is now trailing the likes of Croatia Airlines and Jazeera Airways.

JAL's dramatic decline has proved a sobering experience for an airline that grew from a handful of leased planes in 1951 into a global fleet of 280 aircraft serving 220 airports in 35 countries.

In recent years it became a victim of its own success, making a series of risky investments while creaking under the weight of skyrocketing pension and salary costs.

It was subject to government pressure to serve unprofitable domestic airports, built for no other reason than to support the construction industry, in return for government bailouts during its periodic crises.

Let me get this straight. This company was pressured by the government to do things that were not in its own interest, and as a result has been on the dole repeatedly. I, for one, am shocked to see this as the result of following "government pressure" over benefitting shareholders.

I mean, it's not like the government told banks to make more subprime loans and then had to bail them out......okay, bad example.......

I mean, it's not like the government is telling GM and Chrysler what cars to build in the midst of a bailout........sorry, another bad example.......

Healthcare, that's the ticket. By directing doctors, insurers, hospitals, drug makers, and medical device manufacturers to act against their own self-interest (and often incurring huge losses in the process), it will lead to a utopia where everyone is covered, and medical care is both widely available and cheap. I mean, it's worked before, right?

[The Gaijin]

Like a lot of Japan, Inc. - domestic routes have been regulated and super expensive for ever. That propped up the international routes.

It is a nice airline to fly and all top notch equipment - but there is no way around the bottom line.

[Sapporo Guy]

Not first hand information but from a retired banker who was in the know during his time.

1.) JAL was/is infested with multiple, double indexed and cross referenced union system. Don't ask what that really means but basically sounded like that JAL had more unions than swiss cheese has holes which it had/has to deal with.

2.) pension ... declining birth rate was just understood to be a problem yesterday. I'll have to check on those risky investments.

3.) flights to the boondocks and woodpeckerville. Well, since JAL has been Japan's pet airline, JAL was required to take responsibility of providing service to all of Japan's airports.
- JAL isn't the only Japanese based international airline, (ANA)
- their are several domestic airlines that partner with either JAL or ANA

- flying from Sapporo to Tokyo costs as much as Sapporo to Guam
- flying from Sapporo to Okinawa costs as much as Sapporo to almost New York
... meaning domestic flights are stupid expensive and supported by citizens

Sony was the first company to go against a government decision. However, most large corporation are in one way or another being "guided" by the government through various means: consultation, contracts, permits, and retired bureaucratic appointments to the corporation itself.

So, YES, the government will tell companies what to do, if they don't then they can forget about any future governmental help.

Shareholders? lolo, what are those?
Most Japanese are not savvy in the use of computers let alone in stocks. I know more than most people around me and what I know is almost nothing. I'd imagine most domestic shareholders are other companies or some type of fund thereby understanding already how the government works.

@ legion
So, yes, you basically are correct. However, I'd say that JAL was not pressured but had moved ahead with bad policy and decisions based on suggestions.

[Sapporo Guy]

oh forgot to add:

Japanese ground crews do actually wave to planes leaving and haven't seen a crew ram their their tow car/truck (what ever that pancake thingy is) into the wall or garbage cans that are in the way ... ahem ... LAX

[The Gaijin]

Wave?? They line up and bow!

Sapporo Guy - the "hokutosei" shindiasha sleeper is a much better way to travel..