Japan Seems Reluctant as Airline Seeks a Bailout

Japan Seems Reluctant as Airline Seeks a Bailout

September 25, 2009, 2:59 am

Japan Airlines pleaded on Thursday for a government bailout, but the country’s new transport minister withheld support on concerns that the carrier’s cost-cutting plans would not go far enough.

Reuters reported that the request by the chief executive of Japan Airlines, Haruka Nishimatsu, for a capital injection from the government came as the carrier’s shares tumbled 16 percent to a record, hit by news reports that lenders might seek to break up the company and that it had asked for a bailout.

Japan Airlines, weighed down by $15 billion of debt and headed for its second consecutive annual loss, is being wooed by Delta Air Lines and a rival group led by American Airlines, which are offering capital in return for closer business ties.

Japan Airlines has been scrambling to put together a restructuring plan to submit to the government this month, a condition of a state guarantee on a billion-dollar loan earlier this year.

The likelihood of further state support has been thrown into doubt by a change in government in August that brought the Democratic Party to power, ending the rule of the Liberal Democratic Party, which had supported state help for the airline.

The transport minister, Seiji Maehara, met with Mr. Nishimatsu on Thursday. He reiterated that he did not want the airline to go bankrupt but said he was not ready to approve a request for the state to prop up the carrier by buying shares.

Mr. Maehara said he wanted to finish restructuring plans by the end of October.

Japan Airlines is seeking about $2.7 billion through a mixture of equity and debt to meet its financing needs through March. Bankers have said they will not lend more to the company unless there is deeper state involvement, either through loan guarantees or a capital increase.