Japan Airlines (JAL), Japan’s largest airline service, has effectively gone bankrupt as of January 19th, but flights and other services are expected to continue normally as the company restructures with governmental help.
JAL announced in a press release that they have officially filed for an application to the Enterprise Turnaround Initiative Corporation of Japan (ETIC), which is a government-sponsored program aimed at corporate restructuring similar to U.S. Chapter 11 bankruptcy.
Despite previous restructuring attempts and multiple government bailouts, the company had seen increasing debt in recent years. In the press release, the company blamed a decrease in international travel due to issues such as the 9-11 attacks and SARS. They marked the recent worldwide economic turndown as the final nail in the coffin.
As part of the ETIC deal, the company stated that it expects to have approximately ¥730 Billion (~$8 Billion USD) of its debt eliminated. JAL will be delisted from the Tokyo Stock Exchange as of Feb. 20th, Nikkei reported.
To help restructure, JAL will receive ¥600 billion (~$6.6 Billion USD) worth of credit from ETIC and the Development Bank of Japan, as well as an additional ¥300 billion (~$3.3 Billion USD) in financing from ETIC in the near future.
JAL stated its plans to revitalize into a profit-earning model include: reducing their work force by approximately one-third (or an astounding 15,700 workers) by 2012, slashing employee pension payments, shifting aircrafts to smaller and more efficient models, restructuring its flight routes (partly to ally with American carriers under the Open Skies Agreement), and removing all current top management.
JAL service continues
JAL promised in its press release to continue its current service and safety standards uninterrupted while it undergoes changes. JAL will honor all commercial transactions and continue its frequent flyer miles program.
Despite the bankruptcy news, the company is still acting like its business as usual. In a press release on Jan. 18th, JAL announced a limited-time Okinawa package tour originating from multiple national airports. The tour is based on the popular Japanese cartoon Doraemon, which has a new movie opening in early March.
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