JAL to halve subsidiaries, trim operations 30% in turnaround efforts+

TOKYO, Jan. 15 Kyodo -
Struggling Japan Airlines Corp. plans to halve the number of its overstretched
subsidiaries and scale down its operations by around 30 percent under a
government-led restructuring process, according to a draft of the
rehabilitation plan obtained Friday.

The government also confirmed that the state-backed Enterprise Turnaround
Initiative Corp. of Japan will announce JAL's court-led restructuring measures
next Tuesday.
Just before the decision by the turnaround body, JAL and its two key operating
and finance units -- Japan Airlines International Co. and JAL Capital Co. --
are expected to file for bankruptcy protection under the Corporate
Rehabilitation Law with the Tokyo District Court, sources familiar with the
matter said.
Under the prepackaged restructuring scheme, Japan's top airline will aim to
turn itself around in three years. The government also plans to release a
statement Tuesday declaring its support to ensure there is no disruption to the
carrier's operations.
Following a meeting with Prime Minister Yukio Hatoyama, transport minister
Seiji Maehara told reporters that he was instructed to ''make all-out
preparations to ensure (JAL's) turnaround while keeping it flying.''
According to the draft of the rehabilitation plan, JAL will reduce its 110
subsidiaries to 57 during fiscal 2010 starting April to concentrate on its
mainstay air transport operations by selling, liquidating and merging its
units.
The company will also consider withdrawing from cargo flight operations and
plans to integrate three of its key subsidiaries, including Japan Airlines
International, into a single firm, the sources said.
JAL's group revenue is expected to shrink from about 1,950 billion yen in
fiscal 2008 to 1,358.5 billion yen in fiscal 2012. The company will also cut
around 15,700 jobs, or about 30 percent of its group workforce, by the business
year through March 2013.
On restructuring of aging aircrafts, JAL will trim the number of jumbo jets
from 37 to 28 by the end of fiscal 2010 and retire all of them by fiscal 2014
to reduce operating costs by shifting to smaller and more fuel-efficient
models.
The draft did not specify which money-losing routes will be sacked, but the
plan is likely to involve the elimination of around 45 domestic and
international routes. Specifically, the turnaround body is mulling the
elimination of 12 domestic routes and 14 international routes on top of the
ones that JAL has already announced to scrap, sources earlier said.
Through a massive debt waiver by financial institutions, JAL will aim to reduce
730 billion yen in liabilities while ETIC will invest 300 billion yen in JAL.
Meanwhile, separate sources said ETIC will ask a total of 28 financial
institutions, including regional banks, to waive 358.5 billion yen in debt,
about 71 percent of which would be forgiven by the state-owned Development Bank
of Japan and JAL's three key commercial creditor banks.
The size of the debt waiver may increase as the original plan was based on the
premise that JAL's corporate pension fund would be dissolved. Instead, ETIC now
plans to stay with proposals to cut pension benefits following approval from
JAL's retirees and current employees.
The entity also plans to clarify shareholder responsibility by delisting JAL's
shares through a 100 percent equity reduction.
JAL is expected to present its rehabilitation plan in July and will aim to
obtain court approval in August, the sources said.
==Kyodo
2010-01-15 23:04:31


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