JAL, Japan Airlines expected to enter bankruptcy protection

Japan Airlines is set for to file for bankruptcy protection.

If it goes ahead, media reports at the weekend said, the bankruptcy filing will be immediately followed by a government-backed restructuring aimed at trimming down the airline, cutting several routes and about a third of its staff. Worries over the airline's future have seen its stock price plunge in recent days, losing more than 90 per cent of its value. On Monday JAL shares were trading at a record low of just $0.05 as investors bailed out on the airline ahead of the expected bankruptcy. That left the market value of Asia's biggest airline at just $150m, or the equivalent price of one new Boeing 787 jet. As of last November the airline was saddled with more than $16bn of debts while several injections of public cash have failed to ease its troubles. While the government has said it will do all it can to ensure JAL keeps flying during restructuring, equity investors in the airline are expected to lose most or all of their money if the company files for bankruptcy. Risky investments JAL was founded in 1951, expanding quickly with Japan's post-war economic recovery and was privatized in 1987. But it soon became the victim of its own ambitions, and when Japan's property and stock bubble of the 1980s burst it exposed the airline's risky investments in foreign resorts and hotels. The airline has also been hit by growing pension and payroll costs, as well as a big network of unprofitable domestic routes that it has been politically obligated to maintain. More recently, JAL's passenger traffic has slowed amid the global economic downturn, swine flu fears, and competition from rival carriers. But despite JAL's financial woes, the airline remains a prized asset for foreign airlines because of its access to Asia. In recent days the Skyteam airline alliance led by Delta airlines has been trying to woo JAL from its current membership of the American Airlines and British Airways-led One World alliance.

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