Decompression event

15 January 2010 By John Foley Follow @johnsfoley

Asia’s biggest carrier is likely to try out a Japanese variety of the U.S. go bust, stay airborne model. In theory, bankruptcy could offer a brand new start. But some rather unJapanese decisions are required, such as letting foreigners in and squeezing shareholders out.

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Shares in Japan Airlines fell 88 percent in the week ending Jan. 15 as investors feared Asia's largest airline by sales would file for bankruptcy, beginning court proceedings to restructure its balance sheet. JAL has around $10 billion of net debt, compared with a market capitalisation of $210 million at the week's closing price.

JAL's restructuring is being sponsored by the statebacked Enterprise Turnaround Initiative Corporation, which is planning to put around $3.3 billion of new capital into the airline, and has prepared a credit line of $6.6 billion along with state banks. Transport minister Seiji Maehara said that the restructuring plan would be decided on Jan. 19.

The airline's biggest creditors are the Development Bank of Japan, Mizuho Financial, Mitsubishi UFJ and Sumitomo Mitsui, which together are owed around $5 billion as of data from the end of September. ETIC has asked lenders to erase around $3.8 billion of debt, while current and past employees will have pensions cut.

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