JAL shares soar a third on government lifeline

JAL shares soar a third on government lifeline

Shares in Japan Airlines have leapt almost a third after the Japanese government pledged to double its credit line to the cash-strapped national carrier.

Shares rose 31.3 per cent to Y88, after earlier climbing as much as 38.8 per cent on the first day of trading after the New Year break, and recouping last week’s 30.9 per cent losses.

The Development Bank of Japan said it was still considering a request from the government to double the credit to JAL to Y200bn ($2.1bn) from Y100bn.

The additional funds would ease concerns of creditors, shareholders and customers of the airline’s stability whilst a restructuring plan is put in place by mid January.

JAL has Y45bn left of its original Y100bn credit line extended by the DBJ earlier this year.

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Investors became extremely nervous last week amid rising speculation that JAL would end up filing for court-backed rehabilitation similar to Chapter 11 in the US.

In November, the airline secured an emergency loan from the DBJ, saying it was “necessary for continuance” of its flights.

The full amount of the loan has not been revealed by JAL, but previous reports suggested the airline needed a loan of €1.3bn, and that it would have run out of cash by the end of November.

JAL is also awaiting a decision from employees and former staff over a 40% cut in their pensions.

“We can’t comment on [the potential credit line extension] right now except to express our appreciation for the support while our restructuring plans are being finalized,” JAL said. “As we continue to work closely with the ETIC, JAL is also working hard on its own, striving to reduce pension obligations as well as working on other measures to improve the situation.”

Shares in rival All Nippon Airways climbed 5.2 per cent on reports that it may take over some of JAL’s international flights. But ANA denied the suggestion, whilst JAL said that it was not surrendering its international operations.

JAL is withdrawing from 16 unprofitable foreign and domestic routes, on top of the dozens it has already cancelled.

The airline is also weighing up a possible tie-up with either American Airlines or Delta Airlines.