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Japan Airlines

Tokyo is poised to back loans to keep JAL flying

Dec 06, 2009

The Japanese government is to guarantee 700bn yen ($7.7bn; £4.7bn) in loans and other funds from financial bodies to keep Japan Airlines going, reports say.

Funding will come from an extra budget for the financial year to March, which is expected to be approved this week, the Nikkei business daily has said.

It is hoped the move will keep debt-hit JAL from having to suspend scheduled flights due to a shortage of funds.

JAL has been struggling with rising fuel prices and competition.

US airline attention

Japan's government has bailed it out four times since 2001. The airline lost $1.5bn in the six months to September.

Bankruptcy-threatened JAL is looking for a capital injection from state-backed fund ETIC as well as any capital from American Airlines or Delta Air Lines.

Three days ago American Airlines and private equity firm TPG offered $1.1bn (£659m) of investment to JAL.

It said the offer was "far superior" to the $1bn offered by rival Delta.

Both carriers are keen for a stake in the Asia Pacific market. JAL has said it will make a decision on the bids by the end of the year.

State injection?

Meanwhile, the Nikkei said the proposed new loan-guarantee scheme would cover possible investments from financial institutions in the airline.

The support measure would also enable institutions to provide short-term funds to JAL.

For the past five weeks JAL has also been in discussions with the state-backed Enterprise Initiative Turnaround Corporation (ETIC), which is now deliberating on whether to inject the ailing airline with public funds.

A decision from ETIC is expected in January.

Tokyo is poised to back loans to keep JAL flying
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