Japan Airlines Corp., together with its two key subsidiaries — Japan Airlines International Co. and JAL Capital Co. — filed for bankruptcy protection Tuesday with the Tokyo District Court under the Corporate Rehabilitation Law. The group’s combined liabilities of ¥2.32 trillion amount to the biggest nonfinancial corporate failure in Japan’s postwar history.

The Hatoyama administration apparently opted for the court-led rehabilitation procedure, which ensures transparency, to demonstrate its departure from the days of Liberal Democratic Party rule, when JAL overcame difficulty after securing the cooperation of banks in a rather opaque process.

Transport Minister Seiji Maehara said, “Today is the starting point for JAL’s revival.” The rehabilitation procedure is the last chance for the flag carrier’s survival and revival.

JAL suffers from excess liabilities of some ¥860 billion. Its creditors will be asked to waive debts of some ¥730 billion. The government-backed Enterprise Turnaround Initiative Corp. of Japan will invest ¥300 billion in JAL, using public funds, and it and the state-owned Development Bank of Japan will set aside ¥600 billion for a credit line.

The rehabilitation plan calls for drastic steps to reconstruct JAL in three years. To rectify its high-cost structure, JAL will cut some 15,700 jobs or about 30 percent of its group workforce, close 31 air routes, halve the number of its subsidiaries from the current 110, eliminate jumbo jets and introduce smaller airliners. The introduction of smaller aircraft is expected to cost more than ¥200 billion. Job cutting is expected to be a difficult process since JAL has eight labor unions.

It is not clear whether the rehabilitation plan will lead to rapid improvement in JAL’s operation, as the plan comes up short on revenue-making measures. It is hoped that JAL’s labor and management will fully cooperate to put the struggling airline on a path of recovery while doing their utmost to ensure flight safety. JAL must also work hard on its tarnished image to avoid losing customers.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.