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Japan Airlines' Woes

JAL may be split into two distinct parts

Sep 23, 2009

Japan Airlines may be split in two along with undergoing a temporary period of nationalization reports say. The struggling airline is desperately trying to obtain cash from investors but some lenders like the Development Bank of Japan are demanding further restructuring and more government involvement in the airline before they are willing to give further assistance.

Japan’s transport ministry is overseeing the restructuring of Japan Airlines after it received a $1.1 billion loan from the state. Now other investors want to see the airline split into two distinct parts. The ‘new’ section would be made up of all routes that are still showing the ability to turn a profit and the ‘old’ section would consist of the parts of the airline that are making a loss.

Along with this proposal some investors want to see the new section given more government money as part of a temporary nationalization plan and see the old section liquidated over a period of time with the selling off of any assets.

The airline is already said to be in talks with other major airlines about possible investment. Delta Airlines and American Airlines along with Qantas and British Airways are all involved in discussions with Japan Airlines about setting up alliances.

However some analysts believe that foreign investment and government backed loans still won’t be enough to save the airline. Last week the Japanese Transport Minister, Seiji Maehara said that it was important that Asia’s largest airline by revenue not be allowed to fail. He will meet representatives from the airline and potential investors for talks later this week.

JAL may be split into two distinct parts
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