Japan Airlines shares hit fresh record low

Shares in troubled Japan Airlines (JAL) plummeted to a fresh low today, losing 24% to 67 yen.

The stock plummeted for a second consecutive day amid reports that the carrier is heading towards bankruptcy under a state restructuring plan.

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 and could also wipe out the value of JAL’s shares and result in greater losses for creditors.

Tsuyoshi Kawata, a senior strategist at Nikko Cordial Securities, commented: “If JAL really does go into a court-led reorganisation the shares would literally become wastepaper, and that’s the nightmare scenario for shareholders.”

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