JAL may drop international routes

Japan Airlines may lose its entire international operation under a plan that would reduce the mighty but profitless airline, Asia’s largest, to a mere domestic carrier. All Nippon Airways would take over all of Japan Airlines’ international services under the plan that the government is considering. Government and Japan Airlines’ sources apparently leaked the details to the Mainichi Shimbun newspaper. The Ministry of Land, Infrastructure, Transport and Tourism is opposed to the proposal, but the Mainichi cites some Japan Airlines executives as saying it is not a bad idea.
The rules governing state-directed rescues are forcing consideration of such a radical move. A restructuring agency, the Enterprise Turnaround Initiative Corp. of Japan is working on a bailout plan for the struggling airline but can help companies only if they can be turned around within three years. The government is evidently concerned that a profit within three years would be unachievable if Japan Airlines kept its international network.

The loss of foreign services would greatly diminish the stakes in the ongoing tussle over Japan Airlines’ alliance membership. The giant carrier is a prized partner in Oneworld, whose leading member American Airlines has been trying to ward off attempts by Delta to lure Japan Airlines to Skyteam. But if All Nippon gets the international operations, the big winners will be that carrier’s partners in the Star Alliance. While restructuring Japan Airlines is a pressing issue, keeping it afloat by warding off a cash crunch is the immediate problem. To do that, the Development Bank of Japan has agreed to increase its unsecured lending to the company, reports Jiji news agency. The state bank had previously agreed to extend ¥100 billion without security to the airline, which has taken up ¥55 billion. The increase followed a meeting between the bank and two ministers, including Transport Minister Seiji Maehara. The restructuring agency has raised the possibility of bankruptcy and court-directed reorganization of Japan Airlines with creditors. That move has increased pressure on the company’s 8,800 retirees to accept a 30% cut in benefits. It also raises the risk that shareholdings in the business would be wiped out. The stock fell to a record low this week.
source: aviationweek.com