Japan Airlines (JAL) has filed for bankruptcy protection, but will continue to operate as it undergoes a financial restructuring plan led by a government-backed body.
The Japanese government has pledged up to ¥900 billion ($10 billion) in funds to keep JAL operating while it restructures.
Japan's Enterprise Turnaround Initiative Corporation (ETIC), tasked to turn JAL around, will inject ¥300 billion into the carrier, says the corporation.
A separate ¥600 credit line will also be available to JAL, adds the ETIC.
Creditors have also agreed to forgive ¥730 billion of the airline's ¥2.3 trillion in debt.
Under the restructuring plan, JAL will renew its aircraft fleet, slash its workforce and cut unprofitable routes, says the airline.
The airline is expected to shed a third of its workforce - or 15,700 jobs - over the next three years.
It will switch from "low-efficiency large aircraft to high-efficiency small aircraft" and restructure and reconsolidate low-demand routes, adds JAL. Reports indicate that the airline will retire its 37 Boeing 747-400s.
JAL has obtained approval from the Tokyo District Court to continue payments for commercial transactions to keep its operations afloat while it restructures, says the airline.
These include payments for fuel, leasing fees and other supplies and services, it adds.
Airline tickets and the frequent flyer mileage scheme will also be protected, says JAL.
The airline will proceed with cuts to its current and former employees' pension schemes, after it earlier obtained the go-ahead from both groups.
JAL's board of directors, including representative director and president Haruka Nishimatsu, resigned today to take responsibility for the airline's financial situation, says the carrier.
A new management structure will be decided in early February, it adds. In the meantime, senior managing executive officer Masato Uehara will be JAL's temporary chief operating officer.
"We are confident that the swift revitalisation of JAL Group will be achieved after which JAL will be reborn as a leading airline group that could again lead the global airline industry," it adds.
JAL, a Oneworld carrier, is also in the process of considering offers of financial aid from two airline alliances.
Delta and SkyTeam have offered a $1 billion financing package to JAL to persuade it to switch alliances.
American Airlines, Oneworld and private investment firm TPG said last week it was prepared to invest up to $1.4 billion in JAL, sweetening its previous $1.1 billion offer.
Delta Air Lines and SkyTeam say it is "ready to provide assistance and support in any way possible" to JAL.
"Delta fully expects that JAL, with the support of ETIC, will be successful in its restructuring and return the airline to a position of prominence," it says.