State-backed turnaround body to oversee Japan Airlines

Asia’s largest carrier, Japan Airlines (JAL), is to be placed under the supervision of a state-backed turnaround body, according to reports.

Speculation that the Enterprise Turnaround Initiative Corporation of Japan may take control of the loss-making airline next week sent its shares up 2.6%.

The Enterprise Turnaround Initiative Corporation of Japan buys the debt of struggling companies and sends in turnaround specialists to help them restructure their operations.

According to sources, the turnaround body will be in charge of negotiating with JAL’s creditor banks about a debt waiver while arranging for public funds to be injected into the carrier.

The airline, 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 is predicting a net loss of 63 billion yen for the fiscal year ending March.

Last month, the International Air Transport Association (IATA) said major airlines continue to suffer amid higher fuel prices.

According to the industry group, losses across the whole industry for the 2009 year could amount to £6.86 billion ($11 billion).

Meanwhile, JAL recently unveiled plans to reduce headcount by almost 7,000 in a bid to save money after making a loss of 99 billion yen (£672 million) during the April to June period.

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

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