TOKYO (Nikkei)–Japan Airlines Corp. is expected to ask creditors for debt relief totaling 300 billion yen, including debt-for-equity swaps and loan waivers, under a plan compiled by a task force overseeing its rehabilitation efforts.
The financially strapped airline operator will negotiate with creditors about the proposed measures and then draw up a tentative business rehab plan later this month. The details will likely be finalized by around the end of next month.
The government task force, which directly reports to Transport Minister Seiji Maehara, says that JAL’s liabilities exceed its assets by at least 250 billion yen. Under the proposed plan, JAL would seek 250 billion yen in debt waivers and 50 billion yen in debt-for-equity swaps to eliminate the negative net worth. Separately, JAL would seek up to 480 billion yen in fresh funding by next March, including 150 billion yen through a capital increase.
In exchange, the company would slash its roughly 330 billion yen underfunded pension obligations to 100 billion yen by cutting pension payouts to retirees and current employees in half. JAL would also be required to reshuffle its management by replacing current President and Chief Executive Officer Haruka Nishimatsu with an outsider. A chief operating officer would be tapped from within the company.
On the operational front, JAL would be forced to slash its work force and unprofitable flights, while bringing more efficient, smaller planes into its fleet. The airline is likely to focus on routes used heavily by business travelers.
(The Nikkei Oct. 14 morning edition)