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January 3, 2010    

Japanese Government to double credit line for JAL

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by Kay Murchie

Struggling Japan Airlines (JAL) has had its credit line doubled to 200 billion yen (£1.3 billion) after an agreement by the Japanese Government today, according to Kyodo news agency.

The extra funding was agreed by Deputy Prime Minister Naoto Kan, Transport Minister Seiji Maehara and other ministers at a meeting this weekend.

A statement said: “The government has decided to expand from 100bn yen to 200bn yen the line of credit from the Development Bank of Japan to Japan Airlines.”

JAL 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.

However, the turnaround body has told JAL’s main creditors it favours a bankruptcy proceeding.

Shares in the troubled airline plummeted 24% last week to 67 yen amid rumours that it was 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.

American Airlines and private equity firm TPG recently 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.

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