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Struggling Japan Airlines offered lifeline

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by Kay Mitchell
Struggling Japan Airlines offered lifeline

Asia’s largest carrier, Japan Airlines (JAL), has been offered a $1 billion (£600 million) lifeline from Delta Air Lines and its Sky Team alliance partners.

According to Delta, the rescue package includes a $500 million equity injection, a revenue guarantee worth $300 million, asset-backed funding worth $200 million and $20 million to cover JAL’s costs for switching alliances.

Under the terms of the deal, Delta will entice JAL away from its current membership of the One World Alliance, which includes American Airlines.

American Airlines is also looking to hook up with JAL with a view to acquiring its profitable Asian landing slots.

JAL has declined to comment on the offer but it is understood Delta is eager to expand its routes to Japan.

JAL, like many others throughout the world, is struggling to stay afloat during the global economic downturn which has led to a slump in demand. Many airlines have been forced out of business as fewer people are travelling by air.

However, JAL has also been affected by the outbreak of swine flu and the airline recently posted a net loss of 32.3 billion yen for the July to September period, compared with a 40.1 billion yen profit a year ago.

The airline recently unveiled plans to reduce headcount by almost 7,000 in a bid to save money as it struggles with $15 billion of debts and a big pension deficit.

However, the Kyodo news agency reported that the airline is to increase the number of job losses to 13,000.

The news comes as JAL is seeking an injection of public funds to strengthen its capital as it restructures under the watchful eye of a state-backed turnaround body.

In early trading today, JAL’s share price down fell to a record low of 94 yen and the stock eventually closed down 3.9% at 98 yen.

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News posted: November 18, 2009

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