Japan Airlines filed for bankruptcy
Japan Airlines (JAL), the Asia’s biggest airlines, has filed for bankruptcy protection on Tuesday, 19th January, 2010. It has applied for the protection in the Tokyo District Court under the Corporate Rehabilitation Law. Seiji Maehara, the transport minister of Japan, has said that JAL has entered a restructuring process under the guidance of the court. The process is similar to a Chapter 11 bankruptcy filing in the US.
Background of Japan Airlines
Established in the year 1951, Japan Airlines started its operations in 1953. Gradually it became the biggest state-owned airlines in Japan. Keeping in pace with the Japan’s economy, the airlines expanded quickly the Second World War and it was privatized in the year 1987.
What led to bankruptcy filing?
According to experts, years of mismanagement has led JAL to file for bankruptcy. The Japan Airlines presently owes more than $25 billion in debt. In spite of 4 government bailouts from the year 2001, JAL has expected a loss of about $1.4 billion in 2009. JAL’s application for bankruptcy protection signals one of the largest corporate failures of Japan outside the financial sector.
Effects of bankruptcy filing
As a result of bankruptcy filing, JAL will have to cut about 16,000 jobs by March 2013 and also reduce pensions for the retired staffs. As part of its restructuring process, the airlines will have to replace their existing 747 jumbo aircrafts by more fuel-efficient ones and cut some of its existing routes as well. Presently, JAL serves about 220 airports situated in 35 countries that include 50 destinations in Japan.
Will JAL continue with its operations?
Though Japan Airlines will have to undergo certain changes regarding its carriers and aviation routes, yet JAL’s airplanes will continue flying in the air. This has become possible as the Japanese government has granted about $10 billion of cash. Moreover, the lenders have also forgiven about $8 million debt and the shares of JAL have been removed from the Tokyo Stock Exchange on 20th February, 2010.
Therefore, Japan Airlines will continue with its flights during the period of reorganization. The airlines have already announced that the frequent-flier customers would also not lose their miles. The Japanese government has also requested foreign governments to cooperate so that JAL can continue flying all over the world. So, it can be expected the Japan Airlines will be able to recover from its present crisis and continue dominating Asia’s sky in the future.
Related Resources
Life Insurance India – Do you need life insurance for your child. Check out the options from ING Life Insurance.