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October 26, 2009

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Revamp of JAL under new state company

THE Japanese government plans to put a state-backed turnaround body in charge of the overhaul of Japan Airlines, the Nikkei business daily said yesterday, underlining the government's deeper involvement in the process.

Liabilities at JAL would exceed its assets by as much as US$8.8 billion if it were liquidated, a source close to the matter has said, indicating the depth of the problem facing the airline as it seeks aid from banks and the state to avoid bankruptcy.

Separately, JAL, Asia's largest airline by sales, has decided to boost planned job cuts by 44 percent to 13,000 jobs, and cut the number of its subsidiaries by more than half as part of its restructuring steps, Kyodo news agency said.

The state-backed organization, the Enterprise Turnaround Initiative Corporation of Japan, invests in and buys debt of companies with strained balance sheets and dispatches turnaround specialists to assist them in restructuring.

JAL is set to slash its debt under the government's guidance and come up with a drastic restructuring scheme, the Nikkei said. The decision to put JAL under ETIC's supervision will be announced as early as this week, the paper said.

The ETIC, established earlier this month, operates like an investment fund and initially has the ability to procure up to 1.6 trillion yen (US$17 billion) in state-guaranteed funding in the current fiscal year to March 2010.

No officials at the ETIC were immediately available for comment.

A task force that reports to Transport Minister Seiji Maehara has been seeking a bridge loan of about 180 billion yen for JAL and a total capital boost of 300 billion yen from both the government and the private sector, the source said.


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