Japan Airlines May Receive More Aid From Government, Kamei Says

Japan Airlines May Receive More Aid From Government, Kamei Says


Sept. 19 (Bloomberg) -- Japan Airlines Corp., Asia’s most indebted carrier, may receive more government-backed loans as it seeks alliance partners, said Shizuka Kamei, the nation’s newly appointed financial services minister.

State-owned Development Bank of Japan, which has already made 235 billion yen ($2.6 billion) in loans to the Tokyo-based carrier, could provide more funds, Kamei said in an interview yesterday. The bank and local lenders including Mizuho Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. provided the airline with a 100 billion yen loan in June.

Government support may encourage carriers American Airlines, Delta Air Lines Inc. and Air France-KLM to pursue investments in Japan Air. American Airlines, the world’s second- largest carrier, may lead other members of the Oneworld alliance in an investment in JAL, as the carrier is also known, two people familiar with the plan said.

“It’s a big national project to rehabilitate the airline properly,” said Kamei, 72, who became minister on Sept. 16. “We will back up JAL if the company makes all efforts for its survival.”

Japan Air, which has received three government bailouts since 2001, predicted a full-year loss of 63 billion yen and is forecast to lose 80 billion yen, according to the median of 12 analyst estimates compiled by Bloomberg.

Standard & Poor’s yesterday put the carrier’s B+ long-term corporate credit and senior unsecured debt on watch for a possible downgrade, citing challenging business conditions and uncertainty over the company’s financing support from the government.

Declining Passengers

Globally, the airline industry may lose $11 billion this year, according to the International Air Transport Association. JAL had a 25 percent drop in overseas passengers in June, the biggest decline since outbreaks of severe acute respiratory syndrome and bird flu in 2003.

The carrier has also been in talks on possible stake sales to Delta and Air France-KLM, both members of the SkyTeam Alliance, people familiar with the matter have said.

JAL needs to reform its high-cost structure and regain lenders’ confidence, Seiji Maehara, the country’s new transport minister, said Sept. 17.

The airline plans to cut 6,800 jobs by the end of 2011, and aims to eliminate the most routes in its history, President Haruka Nishimatsu said earlier this week. The carrier had 47,526 employees at the end of March, compared with 33,045 staff at All Nippon Airways Co., Asia’s second-largest airline by sales.

Coalition Government

Kamei, the leader of the four-year-old People’s New Party replaced the Liberal Democratic Party’s Kaoru Yosano in overseeing the Financial Services Agency and Japan’s banking and insurance industries after LDP was swept from power in an Aug. 30 election. The PNP is a minor partner in the coalition government led by the Democratic Party of Japan’s Yukio Hatoyama.

Kamei, who has served as transport minister under former LDP governments, also said yesterday he supports delaying loan repayments to struggling small and mid-sized companies. The comments put him at odds with Hirohisa Fujii, Hatoyama’s finance minister.

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