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Wednesday 13th of January 2010
January 11, 2010    

Bankruptcy looming for Japan Airlines

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by Kay Murchie

Troubled Japan Airlines (JAL) is expected to enter bankruptcy proceedings within the next couple of days, according to reports.

It is believed the state-owned Development Bank of Japan has already agreed to the bankruptcy.

The airline, which is Asia’s largest carrier, is grappling with a mountain of debt and it is currently under the watchful eye of the state-backed turnaround body (the Enterprise Turnaround Initiative Corp of Japan), which will decide later this month whether or not to support JAL with taxpayer money.

Meanwhile, the airline is also understood to be on the verge of abandoning British Airways and American Airlines by withdrawing from the Oneworld alliance.

At the end of December, shares in the airline plummeted to a record low of 67 yen amid rumours that it was heading towards bankruptcy under a state restructuring plan.

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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