Japan Airlines Corp. filed for the country’s fourth-largest bankruptcy under a 900 billion yen ($10 billion) turnaround plan after four government bailouts failed to revive Asia’s most indebted carrier.

The company and two units applied for protection from creditors at Tokyo District Court today, with 2.32 trillion yen in liabilities. JAL, which flew at least 45 million passengers last year, will continue operations.
Asia’s largest airline will shed staff, cut unprofitable routes and retire older planes as it restructures following a 131 billion yen first-half loss.
The company, founded in 1951, filed for bankruptcy to access new capital and loans from a government-backed fund and a state lender after Prime Minister Yukio Hatoyama’s four-month-old administration ended unconditional support for the nation’s flag carrier.
“JAL’s culture is all about the interests of stakeholders, and bankruptcy is the only way to solve this,” Mitsushige Akino, who oversees about $450 million in assets at Tokyo-based Ichiyoshi Investment Management Co., said before the filing. “JAL has received capital so many times for so many years, but it’s still failed.”
The airline, worth more than $6 billion as recently as March, will be delisted following the bankruptcy, wiping out shareholders.
State-backed Enterprise Turnaround Initiative Corp. of Japan previously said turnaround plans included continuing to pay vendors and aircraft lessors, as well as maintaining the carrier’s frequent-flyer program.
Delta Air Lines Inc. and American Airlines, the world’s two biggest carriers, have made rival offers to invest in JAL or a restructured company to access routes in China and Japan. Both airlines have said a bankruptcy wouldn’t deter them. JAL is likely to switch to Delta’s SkyTeam from American’s Oneworld, according to people familiar with the situation.
JAL also filed for bankruptcy in New York, asking a U.S. court to prevent creditors from trying to collect debts while the Japanese case is pending, according to court documents.
During its turnaround, JAL will cut its workforce to 36,201 from 51,862, retire its 37 Boeing Co. 747-400s and cut international and domestic routes.
Kazuo Inamori, the 77-year-old founder of Kyocera Corp., has been named to oversee JAL’s restructuring as chief executive officer.
The yield on JAL’s 10 billion yen in 2.94 percent notes due in 2013 jumped to 77 percent yesterday from 15.6 percent on Dec. 30, according to Japan Securities Dealers Association prices on Bloomberg. The notes yielded about 9.5 percent a year ago. The carrier’s bondholders may recover 25 percent of face value, according to the median forecast in a Bloomberg News survey of five analysts.
The airline closed unchanged at 5 yen in Tokyo trading today. The carrier has slumped 93 percent this year on speculation it would collapse.
JAL, Asia’s first major flag carrier to seek bankruptcy, filled less than 65 percent of seats on domestic routes in each of the last six fiscal years. The airline suffered a 16th straight drop in overall passenger numbers in November as the global recession sapped travel.
“Artificially supporting an unsustainable airline harms the market,” said Peter Harbison, managing director at the Sydney-based Centre for Asia Pacific Aviation. “There may temporarily be some bad feeling against JAL, but it doesn’t take long before fares adjust to draw in passengers.”
JAL, privatized by the government in 1987, served 59 domestic airports as of April and flew to about 20 other countries and territories.
The airline had a fleet of 279 planes as of March. It has another 50 aircraft on order at Boeing, valued at about $7.95 billion. The tally includes 35 787s.
Boeing spokesman Miles Kotay in Seattle declined to comment on JAL before the bankruptcy filing, saying the planemaker doesn’t publicly discuss customers. JAL has no aircraft on order at Toulouse- based Airbus SAS.
(Source: Bloomberg)