Thursday, June 3, 2010
JAL Cancels Shareholder Benefits Plan

TOKYO (Nikkei)--Japan Airlines Corp. said Thursday it is dropping the idea of continuing its shareholder benefits plan, which includes 50% discounts on domestic flights.

The move comes amid rising criticism, mainly from the Transport Ministry, that the public funds being pumped into the carrier would benefit JAL shareholders, whom critics say should also take some responsibility for the company's troubles.

TOKYO (Nikkei)--Still stuck with a shortfall in capital, Japan Airlines Corp. and the government's turnaround body are considering asking the carrier's main lenders to lift their financial assistance, The Nikkei learned Thursday.

The hard-up airline could submit a request as soon as this month, but with a backlash from the banks a certainty, negotiations are likely to be fraught.

Under reorganization plans cobbled together in January, JAL expected a net loss of 1.2 trillion yen for the fiscal year ended in March. But the red ink likely swelled to 1.35 trillion yen.

After seeking a 730 billion yen debt waiver from the banks, the airline counted on a investment of 300 billion yen from the Enterprise Turnaround Initiative Corp. of Japan to eliminate negative net worth of 870 billion yen. But negative net worth blew out to the 1 trillion yen level due to such factors as rising restructuring costs and mounting pension obligations. Therefore, JAL has been unable to escape a capital shortfall.

As part of plans for increased aid, JAL could request the banks to forgive around 90% of their loans, up from the earlier 83%. Another proposal is to seek a debt-for-equity deal. In addition, the ETIC is considering offering more financial help. Estimates put the beefed-up assistance package at more than 100 billion yen altogether.