JAL Bankruptcy

It is a known thing as to how the global airline industry is reeling under heavy losses. Worldwide international air travel fell by more than 4% last year causing losses of more than 11 billion USD to the industry.


Our Home grown airlines are no exceptions and we have been witnessing the various dramas that are being narrated in the Indian skies. We have been seeing how the state run and the private airlines out here are struggling to stay afloat. There have been only calls for restructuring, management changes, improved operational efficiency and bailout packages. However, as of now nothing concrete has happened.

I have always had this doubt as to how come some private airlines like Jet Air is still afloat in spite of the business making no money, no sight of turnaround anywhere nearby, no infrastructure improvement, over capacity and piling up of debts. I find it really tough to understand a 4000 crore company like Jet paying around probably 900 crore or even 1000 crore in interest expense this financial year to service around 16,000 crore of debt. It is to be seen if any our airline would follow the Japanese Airlines.

Japanese Airlines, Asia's largest by revenues filed for bankruptcy under a 10 billion USD turnaround plan after four government bailouts failed to revive Asia's most indebted carrier. The company applied for protection from creditors at Tokyo District Court today with more than 2.3 trillion yen in liabilities. The airline flew more than 45 million passengers last year.

The company plans to shed staff, cut routes and retire older planes as it is trying to restructure following a 131 billion yen first half loss. The airline which is worth more than 6 billion USD last year will be delisted and this wiping out the wealth of shareholders. The company's shares fell recently from above 1 USD to just 8 cents.

JAL will likely get 730 billion yen in debt forgiveness, including 350 billion yen from financial institutions, Enterprise Turnaround Initiative Corp. of Japan, the state- affiliated fund leading JAL’s restructuring, said without elaboration. Unsecured creditors will be asked to waive about 83 percent of claims, based on figures in the plan. JAL will cut its workforce to 36,201 from 51,862, retire its 37 Boeing Co. 747-400s and cut international and domestic routes.

The yield on JAL’s 10 billion yen in 2.94 percent notes due in 2013 jumped to 77 percent yesterday from 15.6 percent on Dec. 30. The notes yielded about 9.5 percent a year ago. The airline’s shares closed unchanged at 5 yen in Tokyo trading today, having slumped 93 percent this month.