Japan Airlines stock dips as pressure builds for bankruptcy restructuring

SHARES of Japan Airlines fell nearly seven per cent yesterday after a newspaper said the carrier’s main creditor and the finance ministry supported bankruptcy as a way to restructure the heavily indebted airline.

The report in the Nikkei business daily added to growing speculation that JAL, Asia’s largest carrier by revenues, was headed for bankruptcy as part of a rescue plan being hammered out by a state-backed turnaround fund and Japan’s largest banks.

JAL shares have swung violently over the past few weeks. They surged 34 per cent in the past two days on news the government was aiming to boost its short-term funding, bouncing back from a 24 per cent plunge on the last trading day of 2009.

The state-owned Development Bank of Japan said after the market closed yesterday it had decided to double its credit line for JAL to 200bn yen ($2.2bn).

The extra funds will keep the carrier operating until the turnaround fund, called the Enterprise Turnaround Initiative Corp of Japan (ETIC), decides if it will rescue JAL later this month.

The ETIC has proposed a bankruptcy procedure as the most transparent way to restructure JAL, and is now in the process of convincing creditors.

Jiji Press said the ETIC was considering investing 200bn to 300bn yen in JAL as part of a support package.