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Thursday 31st of December 2009
December 29, 2009    

Japan Airlines shares hit record low amid bankruptcy rumours

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by Kay Murchie

Shares in troubled Japan Airlines (JAL) plummeted by 11% today to a record low of 85 yen amid reports that the carrier could be forced to file for bankruptcy.

The stock has lost almost 60% of its value this year.

The airline, which is Asia’s largest carrier, has been struggling amid 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 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 has been seeking an injection of public funds to strengthen its capital as it restructures under the watchful eye of a state-backed turnaround body.

Last week, Finance Minister Hirohisa Fujii said the state would not give the airline any more loans. It has been bailed out by the Government four times since 2001.

American Airlines and private equity firm TPG offered $1.1 billion of investment to JAL and this followed a $1 billion lifeline from Delta Air Lines and its Sky Team alliance partners.

American and Delta are both keen to hook up with JAL with a view to acquiring its profitable Asian landing slots.

However, a bankruptcy filing would make a deal with American or Delta complicated.

Nagayuki Yamagishi from Mitsubishi UFJ Securities comments: “There’s a lot of concern about what might happen if JAL does end up going through a bankruptcy court, what will happen to shareholders if the stock basically becomes worthless.”

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