Creditors of debt-ridden Japan Airlines would incur losses of some 700 billion yen (7.6 billion dollars) if the struggling carrier enters a bankruptcy process, a report said. The state-backed body overseeing JAL's restructuring, Enterprise Turnaround Initiative Corp (ETIC), had submitted the estimate to JAL's major creditors, Jiji Press reported, without revealing its sources.
ETIC also told the creditors it expected a bankruptcy filing would be made on January 22, although some officials remained unconvinced by the idea, Jiji reported.
JAL, battered by the global recession and the swine flu pandemic, is scrambling to slash costs and is seeking its fourth government bailout since 2001 in the face of mounting losses. Local media had already reported that ETIC was considering the possibility of the carrier filing for protection from creditors under court-led bankruptcy proceedings.
Such reports dragged down shares in Asia's biggest carrier to a record low on December 30. Japan's government has ruled out allowing JAL to collapse, but has left the door open to possible bankruptcy proceedings to allow the group to restructure more easily.
By ETIC's estimate, JAL has a negative net worth of around 700 billion yen, Jiji Press said. ETIC is considering becoming JAL's rehabilitation sponsor if the carrier files for a bankruptcy process, Jiji and other media reports have said. Bankruptcy protection can enable a company to restructure its debts with creditors and implement other measures to emerge stronger, as seen with ailing US auto giant General Motors.
The airline has said it plans thousands of job cuts and a drastic reduction in routes as part of its effortts to return to profitability. JAL has been offered financial assistance by both American Airlines and Delta Air Lines, which are competing to take a minority stake in the Japanese carrier, eyeing its coveted Asian landing slots.