JAL poised for $7.8bn government bailout

JAL poised for $7.8bn government bailout

The fate of Japan Airlines has taken another twist after it has emerged that the government is considering loan guarantees to the tune of Y700bn ($7.8bn) to bail out the beleaguered carrier.

Shares in JAL climbed over 7 percent on the news, despite the deal not yet being a certainty.

Speculation rose following a leak at the weekend that the guarantees were included in a draft supplementary budget being prepared by the government. This would suggest that the government is willing to front a significant amount of taxpayer money at risk to rescue the airline.

The budget itself has not yet been approved, and was delayed by disagreements within the new Democratic party-led coalition over its size.

At the end of last month, the airline secured its fourth government loan since 2001 in order to keep flying, following news that it had lost more than Y130bn in the six months to September.

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The Enterprise Turnaround Initiative Corporation, a state-backed investment body, is working on a restructuring plan that it expects to unveil early next year.

This latest twist follows last week’s offer by American Airlines by raising its bid to US$1.1bn. The offer was an attempt to thwart a rival bid by Delta by offering US$500m in new equity, plus another US$500m in asset-backed financing and compensation.

Both American Airlines and Delta are trying to strengthen their networks in the Far East, with a new open skies deal between the US and Japan expected to be signed next year. JAL’s services across the Far East, especially China, would be a major feather in the cap for either airline.