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Government panel to launch review of JAL bailout

JIJI

A new government panel is due to begin a review of the financial support given to Japan Airlines, or JAL, as part of a bailout package under the previous administration.

The review, which will start next month, is taking place in response to criticism within the ruling LDP-led coalition, from those who say that the bailout has distorted competition in the airline market.

The review comes amid a shift by the current administration away from JAL. The government decided earlier this month, for example, to replace JAL with ANA Holdings Inc. — the parent of All Nippon Airways — as the maintenance service provider for government aircraft.

The panel on competition policy and public assistance for corporate rehabilitation was created earlier this month under Tomomi Inada, the state minister in charge of administrative reform. The Fair Trade Commission serves as its secretariat.

The panel, consisting of legal scholars, lawyers and others, will draw up an interim report by the year-end on how market competition is affected by financial assistance provided by the government to debt-ridden companies. It has also been tasked with drawing up a list of potential rules that could help ensure the fairness of public turnaround support.

It will start hearings next month, beginning with interviews of officials from the Regional Economy Revitalization Corp. of Japan, the successor of Enterprise Turnaround Initiative Corp. of Japan, which helped with JAL’s recovery.

A government source said the panel will not examine specific cases, but noted that the JAL case may set a precedent for future talks on the public bailout of struggling firms.

JAL had a cozy relationship with the former LDP administration before it was ousted from power in 2009.

In the face of JAL’s bankruptcy in 2010, the then DPJ government appointed Kyocera Corp. founder Kazuo Inamori, who was close to the party, to lead the airline’s turnaround as its chairman.

The DPJ government also injected ¥350 billion of public money into the failed airline, arranged debt waivers totaling ¥520 billion and exempted JAL from corporate taxes.

While JAL successfully completed the rehabilitation process a few years later, the LDP was frustrated with the airline’s close ties to the DPJ, as well as its termination of many domestic routes — part of the rehabilitation effort.

The LDP ousted the DPJ from power in general elections held in December 2012. During a parliamentary meeting last March, Prime Minister Shinzo Abe said that the public bailout of JAL was responsible for a number of problems in the airline industry.