Japan Airlines set for bankruptcy filing

The former state-owned flag carrier is believed to be on the verge of seeking court protection from creditors and delisting its shares from the Tokyo Stock Exchange, to make it easier to restructure its debt and slash costs.

It would be one of Japan's biggest bankruptcies in recent years, as the company becomes one of the highest profile victims yet of the country's long economic malaise.

While Tokyo has pledged to do its utmost to ensure the airline keeps flying during restructuring, equity investors are expected to lose most or all of their money if the company goes bust.

JAL, which lost about $1.5 billion in the six months to September, is seeking public aid in the face of mounting debts.

According to Japanese media, the company is set to receive an injection of government funds worth several hundred billion yen (several billion dollars) under a prepackaged restructuring plan that would see it file for bankruptcy.

At the same time JAL's creditor banks are expected to be asked to forgive loans worth several hundred billion yen.

Dutch carrier KLM said on Monday that talks involving Air France-KLM and America's Delta Air Lines on Japan Airlines' future were "going well", after the Yomiuri Shimbun newspaper reported that JAL had agreed a tie-up with Delta and a switch to the SkyTeam alliance.

The airline is reportedly set to slash more than 15,000 jobs and sell non-core assets such as hotels to stem massive losses.

JAL shares plunged to an all-time low of just five US cents Monday. The market value of the once-venerable carrier now stands at just $150 million, less than the cost of one new jumbo jet.

Experts say radical downsizing is long overdue at JAL, which has been hobbled by high costs since its days as a state-owned flag carrier and is overexposed to unprofitable domestic and overseas routes.

JAL has been hit hard by industry turbulence unleashed by the September 11, 2001 terrorist attacks in the United States, the Iraq war and the global financial crisis, as well as the SARS, bird flu and influenza health scares.

Eyeing its lucrative Asian landing slots, US carriers American Airlines and Delta Air Lines are now in a bidding war for a slice of the airline.

The government has tapped Kazuo Inamori, a 77-year-old entrepreneur and ordained Buddhist monk, to run the stricken airline during its overhaul.

Inamori is one of Japan's most respected business executives and management gurus, having founded both high-tech parts supplier Kyocera and a company that later became part of KDDI Corp., now Japan's number two telecoms firm.