Japan Airlines has confirmed that it will seek help from a new quasi-government body to help turn around its operations.
"We have asked the Enterprise Turnaround Initiative Corporation of Japan to help us revive the group and started preliminary consultations on revival assistance," says a JAL spokeswoman. She adds that the carrier will co-operate fully with the agency, which was launched earlier in October to help turn around debt-laden companies.
The move comes after JAL reported a net loss of 99 billion yen ($1.1 billion) in the three months to June, and forecast a net loss of 63 billion yen for the fiscal year to March 2010. It also has an estimated 1.35 trillion yen of debt and high cost base, and bankers estimate that its liabilities exceed its assets by about 250 billion yen.
Earlier today, a government-appointed task force that was looking at how the state can help JAL recommended that the carrier turn to the ETIC. It said that JAL could recover if it reduced its fleet size, cut its work force, reduced the number of flights and slashed other costs including pension payments.
The ETIC, which can draw on up to 1.6 trillion yen in state-guaranteed funding, will decide on whether it can help JAL after studying its assets and its prospects for recovery. This could take several months, and JAL's creditors like the state-owned Development Bank of Japan must approve a plan as well.
Japanese transport minister Seiji Maehara, speaking to reporters in Tokyo after the task force gave him its recommendations, said that the government was willing to help JAL as the carrier operates about 60% of domestic flights and serves an important transport function for the economy.
"If JAL were to stop flying, that would cause tremendous damage to the Japanese economy and disrupt travel with foreign countries," he added.