Japan Airlines moved a step closer to bankruptcy on Friday by drawing down $1.6 billion in emergency funding and with the government setting Tuesday as the day to officially start a state-led restructuring.
JAL, Asia's largest airline by revenues but with a market value now lower than that of budget carrier Skymark Airlines, will file for bankruptcy protection as early as Tuesday, sources have told Reuters, as part of a restructuring being crafted by a state-backed turnaround fund.
Transport minister Seiji Maehara met Prime Minister Yukio Hatoyama and agreed Tuesday would be the day the state-backed fund would officially decide to support the carrier, a deal contingent upon it filing for bankruptcy. "We are doing everything possible to reduce anxiety and ensure that X-day will not cause any confusion," Maehara told reporters on Friday.
'X-day' is a term used by those working on JAL's restructuring to refer to the day it will file for bankruptcy. JAL, mired in losses and with about $16 billion in debt, applied in October to the Enterprise Turnaround Initiative Corp of Japan (ETIC), a fund that can draw on government-backed funding to bail out ailing firms.
The ETIC is expected to make an official decision next week to support JAK with public money after the carrier files for what could be Japan's sixth-largest bankruptcy. JAL said on Friday it had procured 145 billion yen ($1.6 billion) in funds remaining from a 200 billion yen credit line provided by state-owned Development Bank of Japan, indicating it was building up emergency cash.
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