Japan Airlines to slash 15,700 jobs as part of its bankruptcy protection deal

City A.M. Reporter
JAPAN Airlines Corporation filed for bankruptcy protection yesterday owing more than $25bn (£15.2 bn), and vowed to slash 15,700 jobs in an effort to survive in an industry hit by volatile fuel costs and financially-pressed flyers.

JAL, Asia’s largest airline by revenues, will remain in the skies thanks to nearly £6.7bn in support from a state-backed fund but must go through a sweeping restructuring under a new board and management.

Shareholders will be wiped out and lenders will forgive a larger-than-expected debt as part of the deal with the fund, the Enterprise Turnaround Initiative Corporation of Japan (ETIC).

Bankruptcy will only be the beginning for an airline with depleted capital, and facing rising fuel prices and shrinking passenger numbers, on top of hefty restructuring costs. JAL’s 2.3 trillion yen bankruptcy ranks as Japan’s fourth-largest ever and its biggest by a non-financial firm.

JAL, which has now been bailed out by the Japanese government four times in the past 10 years, will cut 31 routes and replace many of its older planes. It also faces tough decisions about foreign capital and alliances.

“We’re now finding out that things were a bit worse than expected,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. “What this has shown is the nation won’t just take total care of a company... they’ll let badly run companies fail.”