Business

Wednesday November 11, 2009

Japan to decide on JAL rescue package soon


Government to tackle pension and bridge loan issues

TOKYO: Japan’s government is set to reach a decision on a rescue package for Japan Airlines Corp this week that would tackle issues such as cuts to pensions and its need for urgent short-term financing.

But the government is not prepared to extend a guarantee to bridge loans for JAL, Kyodo news agency reported – a development which could put the airline’s main banks off extending the loans.

A source familiar with the matter has said that JAL would run out of cash as early as this month, and needed about 100 billion yen (US$1.1bil) in bridge loans.

“Without a state guarantee, I think the banks will be reluctant to provide bridge loans to JAL,” said Ryota Himeno, a transport sector analyst at Mitsubishi UFJ Securities.

Japanese Finance Minister Hirohisa Fujii said the government was likely to reach a decision on a rescue package this week, before the struggling carrier announces its first-half results on Nov 13.

A Japan Airlines (JAL) aircraft flies near a JAL building at Tokyo’s Haneda Airport — Reuters

“I don’t know what the details of the rescue package will be. But it’s realistic to expect that a decision will be reached this week,” he told a news conference.

JAL’s lenders have not publicly stated their position on extending bridge loans, as they wait for the government to decide how much state support the carrier will receive.

Transport Minister Seiji Maehara said at a news conference that the government task force already had a good idea of how it would tackle the issues of the bridge loans and JAL’s pension shortfall which is estimated at 330 billion yen (US$3.7bil).

Kyodo news agency quoted an unidentified senior finance ministry official on Tuesday as saying the government did not plan to guarantee the loans for the time being even if its lenders agree to provide them.

Separately, JAL CEO Haruka Nishimatsu is expected to step down early next year to take responsibility for the airline’s poor performance, the Nikkei business daily reported on Tuesday.

A JAL spokeswoman declined to comment on the report.

JAL, which is headed for its fourth annual loss in five years, is scheduled to announce its first-half results on Friday. — Reuters


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