Shares in Japan Airlines (JAL) fell by 45% to a new all-time low on Tuesday as fears grow that the carrier is heading for bankruptcy.
The fall came despite an improved offer of investment from American Airlines, up from $1bn to $1.3bn. The US carrier is keen to link into JAL's lucrative Asian routes. Meanwhile, JAL's current and former employees have agreed to cuts in the company's pension scheme payouts. The fund has a $3.6bn (£2.2bn) deficit. Those cuts are crucial to the company gaining any government support.
Battle for skies
American Airlines' improved offer of help also comes with strings attached. It wants JAL to stay with the Oneworld alliance that American is also a member of, along with British Airways and Qantas. JAL has another, rival, offer of support from the US. Delta Airlines is offering $500m and wants JAL to join its SkyTeam network. Thomas W Horton, chief financial officer of American's parent, AMR Corp, said: "While JAL and the Japanese government might decide to address capital requirements internally - and we certainly would understand and respect that - our offer of capital would be available if this was deemed an appropriate resource to aid in the restructuring of JAL."
Staff cuts
Japan Airlines applied for a government bail-out in October last year through the state-backed Enterprise Turnaround Initiative Corporation of Japan (ETIC) - a body able to draw on taxpayers' money to prop up the business while it restructures. A decision on that is due before the end of January, but the ETIC requires cost-cutting concessions, which not only include the restructuring of pension arrangements but also potentially severe job cuts of up to a third of the company's 49,000-strong workforce. It will then inject fresh capital into JAL, provided the airline files for bankruptcy and creditors agree to waive around 350bn yen ($3.8bn, £2.36bn) in debts.
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