Japan Airlines flies into turbulence in working out rehab plan

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TOKYO, April 17 Kyodo -
Stricken carrier Japan Airlines Corp. continues to struggle in its efforts to
work out a corporate rehabilitation plan some three months after seeking court
protection from bankruptcy.
Banks which the carrier hopes to borrow from remain unconvinced that the current
draft plan, which includes expanded cuts in routes and personnel, will ensure
its survival.
JAL, which has until the end of June to present a rehabilitation plan, is
currently envisaging withdrawing from a total of 47 routes -- 31 domestic and
16 international -- sometime after October, as well as trimming 16,452 jobs,
nearly one third of its current group work force, by the end of fiscal 2010.
This plan, drawn up by JAL and the bankruptcy administrator Enterprise
Turnaround Initiative Corporation of Japan, is more rigorous than the plan
previously announced in January, when JAL filed for court protection to start
rehabilitation.
The previous plan called for pulling out of a total of 31 routes and cutting
15,661 jobs over three years.
The airline group was hoping that the latest draft plan would gain support from
commercial banks that can provide JAL with loans it badly needs to stay afloat.
JAL President Masaru Onishi called it ''a challenging plan among several
simulated plans.''
But the banks have been calling on JAL to further reduce its international
operations that have been generating huge losses, sources familiar with
negotiations said. Some are even calling for a complete pullout from
international services or limiting operations to the growing Asian market, the
sources said.
Unless the carrier works out a rehabilitation plan credible to them, the banks
will be unwilling to lend money to JAL, which will soon require hundreds of
billions of yen in fresh loans, the sources said.
But a senior JAL official said, ''The banks are calling on us to make all
routes profitable, but that would not allow us to fulfill our mission as a
provider of public transport.''
JAL Chairman Kazuo Inamori said, ''If we were to pull out of international
services, it would not be worth going to all the effort of rebuilding.''
Transport minister Seiji Maehara, meanwhile, appears to be supportive of the
banks' view, saying of the current plan, ''There is a need to further explore
it after considering the issues of demand and the global economy.''
Proposals to pull out of domestic routes, meanwhile, have also met opposition
from local governments who want to keep the routes open. Termination ''will
have a significant impact on the local economy,'' said Aichi Gov. Masaaki
Kanda.
Many JAL employees appear willing to write off their employer, as seen in an
unexpectedly larger number of employees filing for early retirement incentives
that JAL began offering in March.
==Kyodo