Japan Airlines shares dive on break-up worries

Japan Airlines shares dive on break-up worries

Tokyo: Investors dumped shares in Japan Airlines (JAL) on Thursday following reports that the loss-making carrier will request another government bailout and may even break up its operations.

JAL shares tumbled 11% by lunch as concern mounted about the outlook for Asia’s biggest airline, which plans to slash 6,800 jobs—14% of its workforce—and pursue a tie-up with a foreign carrier.

According to the Nikkei business daily, JAL’s creditors—including the state-backed Development Bank of Japan—are calling for its healthy operations to be split from the money-losing segments.

Options under consideration for JAL, which lost more than $1 billion in the April-June quarter, are believed to include liquidating or selling the unhealthy assets.

JAL president Haruka Nishimatsu was due to meet later on Thursday with transport minister Seiji Maehara, who is overseeing the restructuring process.

Nishimatsu is expected to request public funds to boost JAL’s capital base under the industrial revitalisation law, public broadcaster NHK reported.

Maehara will also speak to officials from the Development Bank of Japan and JAL’s other creditors, according to his ministry.

Japan’s new centre-left government has said that it would overhaul the restructuring process set in motion for JAL under the previous government, but has ruled out allowing it to collapse.

JAL has forecast a net loss of ¥63 billion ($690 million) in the year to March 2010, after a ¥63.2-billion deficit last year.

The carrier is reportedly considering abolishing 50 loss-making routes.

Nishimatsu said last week that JAL aimed to seal a tie-up with an overseas carrier by mid-October, without naming any potential partners.

According to local media, Delta Air Lines is considering taking a stake in JAL to help it through its financial difficulties.

American Airlines, British Airways and Qantas are also reported to have made a joint offer of assistance, while European carrier Air France-KLM is seen as a another possible partner.

Delta and Air France-KLM are part of the SkyTeam global airline alliance, while JAL, American Airlines, British Airways and Qantas belong to the rival Oneworld grouping.