Oct. 30, 2009 (The Yomiuri Shimbun) -- The government chose to effectively place Japan Airlines under its control due to fears that 60 percent of the flights that fly over the nation would be grounded if JAL's business situation continued to deteriorate.
Construction and Transport Minister Seiji Maehara has shown he will not hesitate to use public funds to rehabilitate JAL if circumstances warrant. At the same time, the government plans to ask JAL's top management, rank-and-file employees and former employees to take on their share of the burden of corporate reconstruction.
At a press conference Thursday, Maehara was asked why the government would get so involved in the reconstruction of just one company.
"Because JAL operates 60 percent of the flights in the skies over this country," the minister replied.
The corporate reconstruction of JAL is a burdensome legacy left behind by the former administration. There are many possible ways to reconstruct the airline, but Maehara has consistently rejected the idea of legal liquidation since he took office in September.
Maehara remembers the case of Swissair, the Swiss national carrier that went bankrupt in 2001.
Operations of all Swissair planes stopped for 1-1/2 days after the airline announced in October 2001 that it had initiated bankruptcy procedures, stranding more than 50,000 passengers around the world.
Strapped for funds, the airline could not pay for fuel. In Britain, Swissair planes were seized by authorities because the company could not pay navigation service fees.
Halted flights would not be the only undesirable consequence if the government lets JAL go out of business. In that case, All Nippon Airways would become the only major airline for domestic flights, resulting in less competition and limited choices for customers. ===
Experts faced tough opposition
To maintain the current situation of two major airlines competing for domestic passengers, JAL needs to return to sound financial (OTCBB:SNFL) condition.
Maehara initially relied on a task force of corporate turnaround experts to help reconstruct JAL, which was established by the government Sept. 25. The task force was placed under Maehara's direct supervision.
On Oct. 13, the task force presented a draft plan to Maehara, JAL and its major financing institutions, suggesting ways to revive the airline at banks' expense. In the plan, the task force urged the Development Bank of Japan, Mizuho Corporate Bank, Mitsubishi UFJ Financial Group (NYSE:MTU) , Sumitomo Mitsui Banking Corp. and other banks to forgive or accept debt-for-equity swaps for 300 billion yen in debts.
The banks responded angrily.
