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January 4, 2010    

JAL shares recover after Government loans deal

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by Kay Murchie
JAL shares recover after Government loans deal

Shares in troubled Japan Airlines (JAL) soared 31% today after it was revealed that the Japanese Government had asked the state-owned Development Bank of Japan (DBJ) to double JAL’s credit line to JAL to 200 billion yen (£1.4 billion).

The airline has already used 55 billion yen of the 100 billion yen credit line set up by the DBJ.

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.”

It has been bailed out by the Government four times since 2001.

The extra funding is aimed at keeping the airline going until the state-backed turnaround body (the Enterprise Turnaround Initiative Corp of Japan) decides later this month whether or not to support JAL with taxpayer money.

Last Wednesday, the stock plummeted to a record low of 67 yen amid rumours that it was heading towards bankruptcy under a state restructuring plan. The airline, which is Asia’s largest carrier, is grappling with a mountain of debt.

Like many other airlines, it 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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