Tokyo: Japan Airlines, which is seeking a state bailout, sank into the red last quarter as the economic slowdown hit travel and cargo demand, and it said it had applied for mediated debt restructuring.
Saddled with $15 billion in debt, a massive pension deficit and dozens of unprofitable flight routes, JAL is now seeking its fourth state bailout since 2001.
Asia’s largest carrier by revenue said in its earnings report that there was a great deal of uncertainty about its ability to continue as a going concern. It has applied for help to the Enterprise Turnaround Initiative Corp, a government-backed turnaround fund.
JAL fell to a group net loss of 32.2 billion yen ($357 million) in the July-September quarter after reporting a 40.1 billion yen profit a year ago.
Quarterly revenues dropped 26% to 429 billion yen.
“We have a relatively big exposure to international business, and this sector was hit really hard by the global economic downturn,” JAL president Haruka Nishimatsu told a news conference on Friday.
“I think we’ll need to push forward the downsizing of our international business.”
The struggling carrier, which earlier this year projected an annual net loss of 63 billion yen, did not give forecasts for the year due to uncertainties over its business outlook.
JAL applied for a debt restructuring scheme under which a third party will mediate between the company and its creditors.
The scheme, called Alternative Dispute Resolution (ADR), would trigger a suspension of loan payments.
The Japanese government has pledged to enlist a state bank to offer bridge loans to prevent the carrier from running short of cash and keep the airline afloat.
American Airlines Corp and Delta Air Lines have shown an interest in taking a minority stake in JAL to access JAL’s Asian network and get a stronger foothold in Japan.
But analysts say capital injections or additional financing alone won’t improve the carrier’s prospects due to its severely underfunded pension programmes.
Nishimatsu met with the leaders of JAL retirees’ associations on Thursday to seek their approval on pension payout reductions.
Media reports said the leaders expressed their wish to cooperate in some way to save the airline, but many retirees are expected to strongly oppose having their pension payments cut.
JAL’s shares closed down 0.9% at 106 yen ahead of the results, underperforming the benchmark Nikkei 225 average, which fell 0.4%. JAL shares have lost half of their value since the start of the year, while the Nikkei gained 10%.