Japan Airlines (
JAL) is Japan's flagship airline. JAL is the carrier of choice for Japanese government officials, be they the prime minister or Diet politicians on overseas junkets. But JAL is in deep financial trouble.
As a reflection of the national flagship's finances, Standard & Poor's is considering downgrading JAL and subsidiary Japan Airlines International Co's L-T corporate credit and senior debt ratings. JAL and its 100%-owned subsidiary are already rated a speculative B+, and a downgrade would drop this by more than one notch. Ratings would already be poorer if it were not for implied government support for the carrier. Now that the DPJ is in power, even implicit government support is being reviewed.
The rating agencies are carefully reviewing the stance of financial institutions currently supporting JAL, medium-term business plans being drafted to maintain this support, as well as transportation ministry-prodded negotiations with foreign carriers about possible capital tie-ups. American Airlines Inc., British Airways Plc and Qantas Airways Ltd. have made a joint offer of assistance in a bid to supplant Delta Air Lines Inc. The foreign carriers are reportedly offering extensive financial assistance, such as debt guarantees, introducing JAL to banks, providing restructuring consulting services; merging some of the companies' offices; and adjusting the numbers of their transpacific routes. In addition, American Airlines is considering investing in JAL, possibly taking a stake worth several tens of billions of yen.
JAL is currently under a state-supervised rehabilitation process. Incoming transport minister Seiji Maehara has publicly stated that bankruptcy is not an option for JAL, as he apparently sees JAL and All Nippon Airways (ANA) as the two pillars of Japan's aviation industry. Maehara has also said he wanted to scrap the Transport Ministry-affiliated panel designated under the previous government to review the plan. The uncertainty lies in the fact that the DPJ and Mr. Maehara have been vocal critics of the collusive relations between the Liberal Democratic Party and business. Senior management from JAL ,ANA and the transportation ministry were all unable to gain an audience with a senior DPJ lawmakers immediately after the Aug. 30 general election swept the DPJ to power.
In this holiday-shortened week, transport minister Maehara will reportedly meet with Haruika Nishimatsu, president of JAL, senior JAL officials, personnel from the Development Bank of Japan and the vice ministry of the transport ministry to review the Company's restructuring plan before it is finalized by the end of this month.
