• Kyodo News


Japan Airlines Corp. is still struggling to work out a corporate rehabilitation plan some three months after filing for bankruptcy protection.

The banks that the carrier is hoping to borrow from remain unconvinced that the current draft, which includes more cuts to routes and personnel, will ensure its survival.

JAL, which has until the end of June to come up with a viable rehabilitation plan, is now looking at withdrawing from 47 routes — 31 domestic and 16 international — sometime after October. It may also ax 16,452 jobs, or nearly one-third of its workforce, by the end of fiscal 2010.

This plan, drawn up by JAL and the Turnaround Initiative Corporation of Japan, is more rigorous than the one announced in January, when JAL filed to start rehabilitation.

The previous plan called for axing a total of 31 routes and cutting 15,661 jobs over three years.

The JAL group was hoping the latest draft would gain support from commercial banks that can provide the 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 the international operations that have been generating its 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 credible plan, the banks will be unwilling to lend money to JAL, which will soon be needing hundreds of billions of yen in fresh loans, the sources said.

Appeasing the banks appears difficult.

“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,” a senior JAL official said.

“If we were to pull out of international services, it would not be worth going to all the effort of rebuilding,” JAL Chairman Kazuo Inamori said.

Transport minister Seiji Maehara, meanwhile, appears to support the banks’ view.

“There is a need to further explore the current plan after considering the issues of demand and the global economy,” Maehara said.

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. An early retirement package JAL began offering in March has attracted an unexpectedly large volume of applications.

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