Tuesday, January 12, 2010

Japan Airlines Shares Crash Over Bankruptcy Fears

Giant of the Skies Brought Low by Pensioners
Shipping News Feature

JAPAN – Troubled airline Japan Airlines (JAL) has seen its shares value collapse by 45% today over fears that the company’s former workers will not agree to a cut in their pensions in order to secure JAL a state bailout.

The airline needs to reduce it pension deficit by £2.2 billion ($3.6 billion). Its current employees have agreed to accept the deal in order to secure JAL’s future, but former workers have yet to reach the necessary two-thirds majority in agreement to allow the cut to take place.

JAL had said that it was imperative to achieve agreement by today, but now looks likely to delay this until later in the month.

The Japanese Minister of Transport, Seiji Maehara, had said in September that: “we will not crush and liquidate (the airline),” further adding that “it's just impossible.” However, the panel that was set up to examine the actions necessary to allow JAL to remain a viable business entity have been harsh in the requirements they have set.

In order to draw capital from the taxpayer-funded Enterprise Turnaround Initiative Corporation of Japan (ETIC) to prop up the company, JAL needs to cut thousands of jobs and get creditors to waive some £2.37 billion ($3.8 billion) in debts.

Much of JAL’s current woes are attributable to its loss of a lot of its lucrative air freight business. According to company figures freight tonnages handled by JAL in FY2009 are down by around 25% on FY2008 to date.