Oct. 22, 2009 (The Yomiuri Shimbun) -- Japan Airlines' after-tax group losses in fiscal 2009 may balloon to about 500 billion yen, far exceeding the 63 billion yen the company forecast in May, it has been learned.
The sharp increase reflects the decision of the government's task force to move forward the implementation of measures, including job cuts, to tackle JAL's mounting problems.
The task force, which comprises corporate turnaround experts, has booked huge costs in its plan to rebuild the ailing airliner shown to a consortium of major financial institutions on Tuesday.
According to sources, JAL's net operating loss, which shows the bottom line of the company's core business, is expected to be about 200 billion yen in the fiscal year ending in March 2010 due to the declining business performance caused by the economic downturn and other factors. The figure dropped sharply from JAL's initial forecast, which was 59 billion yen in the red.
In addition, the task force included extraordinary expenditures for restructuring in the plan, including costs for encouraging early retirement by JAL's employees and fees to dispose of major pieces of nonoperating equipment. The task force plans to cut more than 9,000 jobs.
The net loss in fiscal 2009 is expected to be the largest ever for JAL. The company recorded a net loss of 88.6 billion yen in fiscal 2003, the year the demand for international flights dropped due to the outbreak of the Iraq war.
JAL's business forecast will be used as a yardstick to decide the amount of debt the company will ask financial institutions to waive and the amount of capital increase it needs, including an infusion of public funds.
Some banks have expressed dissatisfaction with the figure. An executive of one bank said: "The outlook is too grim. It will make the burden of the banks excessive." ===
Banks asked to waive 133 bil. yen
The government task force has asked four banks to waive 133 billion yen they lent to JAL, and accept a debt-for-equity swap for another 30 billion yen, it has been learned.
According to sources, the Development Bank of Japan was asked to waive 44 billion yen, Mizuho Corporate Bank, Ltd. and Mitsubishi UFJ Financial Group (NYSE:MTU) , Inc. were asked to waive 38 billion yen in each, and Sumitomo Mitsui Banking Corp. was asked to forgive 13 billion yen.
The total amount accounts for about two-thirds of the 250 billion yen owed by JAL that the task force has asked financial institutions to forgive or resolve through debt-for-equity swaps. The task force decided the amount based on the loans still remaining and appraised value of the securities.
However, the DBJ and the three megabanks have objected to the amount, saying that the burden imposed on them is too heavy.
The total amount of JAL's interest-bearing debt was 808.7 billion yen as of March 31. Observers have pointed out that interest payments have become an obstacle for the company's earnings.
