JAL facing difficulty securing approval for pension cuts+

TOKYO, Jan. 10 Kyodo -
Japan Airlines Corp. is facing difficulty in securing approval from two-thirds
of its retirees by the deadline of Tuesday for drastic cuts in pension benefits
as it heads for court-backed rehabilitation, sources close to the matter said
Sunday.
Separately, the state-backed body in charge of turning around struggling JAL is
also expected to urge the company to decline investment offers from the two
biggest U.S. carriers amid concern that a capital tie-up could complicate its
rehabilitation plan.
JAL needs to receive approval from two-thirds of the around 9,000 retirees to
cut pension benefits, which have expanded the liabilities of Japan's top
airline.
But the prospects for reaching the necessary threshold became dimmer after
anxiety spread among retirees that they could still face bigger pension cuts
even if they gave their approval, with the government set on a filing for
bankruptcy protection by JAL under the Corporate Rehabilitation Law.
The government and JAL's key creditor banks view pension reform as a
prerequisite for a bailout package to prevent massive public funds that are
expected to be injected for the airline's turnaround being used to finance
pension payments.
The state-backed Enterprise Turnaround Initiative Corp. of Japan plans to
dissolve JAL's corporate pension fund if the airline fails to implement the
pension cuts.
Company officials are making last-minute calls to persuade the retirees before
the deadline, but they will also continue their efforts to secure approval
until Jan. 22, the date by which the retirees can still change their responses.
But the sources warned that it would be difficult to significantly boost
approval for the pension cuts during the extended period.
With regard to JAL's capital tie-up talks with foreign airlines, Delta Air
Lines Inc., the world's biggest carrier with a strong presence on U.S.-Japan
routes, is believed to be the frontrunner in forming a partnership with JAL,
which currently belongs to the global oneworld alliance led by American
Airlines Inc.
If JAL were to receive investment from either U.S. carrier, it would narrow the
options for ETIC when it decides to sell the company's shares after its
rehabilitation, the sources said.
Regarding the airline's pension reform, the retirees have been asked to agree
to a cut of over 30 percent, while current employees have been asked to accept
a reduction of around 53 percent. JAL has already obtained approval from its
current employees, but it needs the agreement of two-thirds of both groups to
implement the proposals.
While ETIC plans to dissolve the pension fund if the proposals are voted down,
the body has informed JAL that it would respect the current level of proposed
pension cuts if approval can be attained, the sources said.
But skepticism is growing among retirees with the government and the body
inclined to pursue court-backed bankruptcy proceedings even if JAL succeeds in
reaching the two-thirds threshold.
Meanwhile, the government and the state-backed corporate turnaround body are
making arrangements for 77-year-old Kazuo Inamori, honorary chairman of Kyocera
Corp., to become chief executive officer of JAL during the turnaround process,
according to sources familiar with the matter.
Inamori is not only known for his management skills in leading the major
electronic parts maker but also for maintaining close relations with key
members of the ruling Democratic Party of Japan.
==Kyodo