TOKYO — Japan Airlines, a once-proud flagship carrier now crippled by $16 billion in liabilities, may soon file for bankruptcy protection as part of a state-led turnaround in one of the largest corporate failures in the Japanese history
Passengers check in on Friday at Japan Airlines at Haneda airport in Tokyo. The airline's stock price fell 13 percent on Friday.
Government officials said a final decision had not yet been reached on the fate of JAL, Asia’s largest airline. But they suggested that the airline, already bailed out by the state four times, would likely undergo some form of court-led restructuring similar to a Chapter 11 filing in the United States, a bold step for the new government of Prime Minister Yukio Hatoyama.
“This problem was long postponed by the Liberal Democratic Party,” the transport minister, Seiji Maehara, told reporters on Friday, referring to the previous administration. “With a change in government, we will find the ultimate solution,” he said.
In a statement, JAL denied a final decision had been made on its restructuring plans, and said it had no announcement to make.
Prime Minister Hatoyama, whose Democratic Party swept to power in September on promises of sweeping changes to Japan’s postwar order, said the government was committed to keeping JAL’s planes flying smoothly throughout the restructuring process.
“We have made efforts to make sure JAL’s operations are not disrupted. We will continue that effort,” he said.
Despite JAL’s woes, two U.S. carriers — Delta Air Lines and American Airlines — are vying for a stake in the Japanese airline. Considered for decades as a prized and protected national icon, JAL’s downfall provides the U.S. airlines with a rare chance to invest in what is still, despite years of mismanagement, a powerful regional player.
Both U.S. airlines hope to tap JAL’s routes to Asia, the world’s fastest-growing aviation market. Executives at Delta and American have said they hope to bolster Tokyo as their hub in Asia, and are also considering a stronger foothold in Japan ahead of the expansion of Haneda airport south of central Tokyo. A recent “open skies” agreement between the United States and Japan is spurring cooperation between airlines of the two countries.
“Whichever form the restructuring takes, JAL needs a strong international partner by its side,” the president of Delta, Edward Bastian, said Thursday in Tokyo where he was meeting with JAL and government officials. “Our objective here is to invest in the restructured company,” he said.
Delta has offered JAL $500 million in equity, as well as a substantial boost in passengers and revenue from its SkyTeam alliance. American, which already has a link with JAL through its Oneworld alliance, has offered to raise its initial offer of $1.1 billion by $300 million to stay put, The Wall Street Journal reported Thursday.
Indeed, Mr. Bastian seemed to push for change at JAL.
“Change is hard but is absolutely necessary to make changes if JAL is going to survive,” he said. “Tough decisions need to be taken.”
Any investment would purchase only a minority stake in JAL, because Japanese law prohibits foreign ownership of its airlines.
It is a spectacular fall for JAL, which rose out of the ashes of World War II and became a symbol of Japan’s rise as a global economic power.
Initially state-owned, it opened its first domestic routes in 1951, and expanded overseas just two years later with a flight linking Tokyo to San Francisco via Honolulu.
The airline continued to grow rapidly together with the Japanese economy, and in Japan’s bubble economy of the 1980s supported the heyday of Japanese package tour groups overseas. The red-crested crane on JAL’s aircraft became a national motif, and Japanese girls dreamed of becoming JAL flight attendants.
But ambitious investments in overseas hotels and resorts during the bubble era, coupled with soaring personnel and pensions costs, started to weigh down on JAL’s finances. The airline was privatized in 1987.
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