Ailing Japan Airlines to receive emergency loans

AP News
Posted: Nov 24, 2009 6:49 AM

Japan Airlines said Tuesday it obtained government approval to receive up to $1.1 billion in emergency loans aimed at preventing the money-losing company from grounding flights.

JAL signed an agreement with the state-run Development Bank of Japan after receiving government approval, a company official said on condition of anonymity, citing policy.

Asia's largest airline has pressed for a government bailout and mulled over massive job cuts and other restructuring steps to avoid collapse. JAL shares tumbled 8.4 percent to a record low Tuesday amid worries over a possible bankruptcy.

The transport ministry authorized the airline's application for the loans after confirming "an event which would interfere with our flight operations could occur," in which "convenience for users and corporate activities would be significantly affected."

The airline Tuesday signed a loan arrangement for an undisclosed amount with the Development Bank of Japan for "funds necessary for continuance of our flight operations."

It also obtained government approval for separate loans of 25 billion yen ($282.2 million) for necessary aircraft imports.

Struggling JAL booked $1.5 billion in losses in the first half of the fiscal year, and faces interest-bearing debt totaling nearly $10 billion.

Last week, Delta Air Lines and its alliance partners said a billion-dollar offer was on the table to lure JAL from its affiliation with American Airlines.

JAL President Haruka Nishimatsu has said he will make a decision on the offer by the end of the year.

On Monday, the airline asked retired workers to accept a 30-percent cut in pension benefits, but investors were skeptical whether the company could settle the thorny pension issue.