- Title: JAPAN: JAL Airlines share price collapses on fears of bankruptcy and delisting
- Date: 14th January 2010
- Summary: TOKYO, JAPAN (JANUARY 13, 2010) (REUTERS) JAPAN AIRLINES (JAL) HEADQUARTERS BUILDING JAL SIGN JAL BUILDING JAL SIGN FLAGS OF JAL AND JAPAN TOKYO STOCK EXCHANGE BUILDING ELECTRONIC STOCK BOARD SIGNALING OPENING OF TRADE ELECTRONIC STOCK BOARD SHOWING NIKKEI AVERAGE AT CIRCLING ELECTRONIC STOCK BOARD TOKYO STOCK EXCHANGE OFFICIALS WORKING JAL STOCK PRICE ON CIRCLING ELECTRONIC STOCK BOARD CIRCLING ELECTRONIC STOCK BOARD SENIOR ANALYST AND GENERAL MANAGER OF FIXED INCOME RESEARCH AT SHINSEI SECURITIES, YASUHIRO MATSUMOTO, WALKING (SOUNDBITE) (Japanese) SENIOR ANALYST AND GENERAL MANAGER OF FIXED INCOME RESEARCH AT SHINSEI SECURITIES, YASUHIRO MATSUMOTO, SAYING: "Japan Airlines' possible bankruptcy has already been reported by the media so the impact of JAL's collapse on the Japanese economy, especially with the effects of the economic stimulus package, as well as its impact on the markets, will be very small."
- Embargoed: 29th January 2010 12:00
- Location: Japan
- Country: Japan
- Topics: Economic News,Transport
- Reuters ID: LVA8O8T96DM3YRL88YW8EX3X1A2Y
- Story Text: Shares of Japan Airlines (JAL) Corp's tumbled 81 percent on Wednesday (January 13), leaving it with a market value of just around $200 million U.S. dollars, on mounting expectations the airline will file for bankruptcy next week and be delisted.
A state-backed fund crafting a restructuring plan for JAL is planning for the carrier to file for bankruptcy as early as Jan. 19, sources told Reuters.
Normally that would lead to a complete reduction of capital and a delisting from the Tokyo exchange, rendering shares worthless.
News of that pending possibility, sent JAL's stock down by its daily limit of 30 yen to 7 yen as of 0449 GMT, following a 45 percent tumble on Tuesday (January 12). In two days, the company has lost about 1.8 billion U.S. dollars in market value and now is hardly worth the cost of a 747-8 Boeing aircraft.
While the news has sent shock waves to a nation once proud of its national carrier, analysts, however, said the overall impact of JAL's demise was negligible.
"Japan Airlines' possible bankruptcy has already been reported by the media so the impact of JAL's collapse on the Japanese economy, especially with the effects of the economic stimulus package, as well as its impact on the markets, will be very small," Yasuhiro Matsumoto, a senior credit analyst at Shinsei Securities told Reuters on Wednesday.
The benchmark Nikkei shed 58.92 points to 10,821.83 after closing at a 15-month high of 10,879.14 on Tuesday. The broader Topix dipped 0.1 percent to 953.49.
The state-backed fund, the Enterprise Turnaround Initiative Corp of Japan (ETIC), plans to put about 300 billion yen in fresh capital into JAL after the bankruptcy filing and oversee its restructuring, sources have said.
The ETIC is still considering a plan that would allow JAL to retain a very small percentage of its capital and keep its listing, but it is leaning towards a delisting to hold shareholders accountable for JAL's performance, a source said.
The state-backed fund has also been looking to bring in an outsider to replace current CEO Haruka Nishimatsu, who has indicated he would resign.
Rather than knowledge and experience in the aviation industry, the fund has focused on finding someone with the leadership capabilities to implement a tough restructuring and motivate employees in the wake of a bankruptcy.
The government has sounded out Kazuo Inamori, the 77-year-old honorary chairman of electronics components maker Kyocera Corp, about becoming JAL's new chief executive officer and overseeing its restructuring - something he himself on Wednesday said was considering taking up.
"As the founder of Kyocera and avid Buddhist, Inamori has the capability to do business as well as to become a public figure who is respected by the people. He will focus on JAL's role to seek profit as a company as well as its role to remain as a public carrier for the people," Matsumoto said.
Inamori founded the predecessor to Kyocera in 1959 with an initial investment of just 3 million yen and turned the company into one of Japan's most profitable technology companies.
Inamori has also been a strong supporter of the Democratic Party of Japan and is a member of a panel headed by Prime Minister Yukio Hatoyama seeking to cut wasteful government spending.
Meanwhile, talks between Delta and American Airlines have been overshadowed by the issue of JAL's very survival.
Delta and American have been courting Japan Airlines - Asia's largest by revenue - with rival offers of financial aid, eager to gain access to its routes to fast-growing Asian markets and a stronger foothold in Japan ahead of the expansion of Tokyo's Haneda Airport in October.
However, an investment from Delta or American could also complicate JAL's restructuring and make it more difficult for ETIC to exit its investment as planned within three years.
Analysts say it would be most detrimental to American to lose its ties with JAL.
"To Delta, obtaining JAL would be an extra gain for the company, whereas to American Airlines, losing JAL could be very deadly. In this equation, there will be more damage to American Airlines and that is why the company has been trying so hard to hold onto JAL," said Matsumoto.
American Airlines said last week it was considering sweetening its $1.1 billion U.S. dollars investment proposal, which is backed by private equity firm TPG. Delta has offered $500 million U.S. dollars in equity and another $500 million U.S. dollars in guarantees and loans.
JAL had been aiming to decide this month whether to keep ties with American in the Oneworld alliance or join hands with Delta and the rival SkyTeam group.
Both Delta and American have said they would seek anti-trust immunity with JAL under the "open skies" treaty between the United States and Japan, allowing them to work closely on pricing and scheduling to boost revenues and save costs.
They are eager to forge a deal with JAL quickly so as not to fall behind Star Alliance members United Airlines, Continental Airlines and All Nippon Airways Co, which said last month they had filed for anti-trust immunity.
The ETIC is eyeing sometime between Jan. 19-22 for JAL to file for a bankruptcy procedure similar to Chapter 11 in the United States, and for it to officially announce it would support the carrier with state-guaranteed funds.
- Copyright Holder: REUTERS
- Copyright Notice: (c) Copyright Thomson Reuters 2011. Open For Restrictions - http://about.reuters.com/fulllegal.asp
- Usage Terms/Restrictions: None