Bankruptcy Chapter For Japan Airlines

Throughout Japanese history the government has bailed out big businesses that were in danger of closing in order to keep them from filing for bankruptcy.

So the general belief was that the Japanese government would help failing companies and give them money to stay afloat.

But that wasn’t the case in a high profile bankruptcy filing by Japan’s most prominent airline.

After being bailed out several times, Japan Airlines Corp. (JAL) recently was forced to file bankruptcy when they realized a government bailout wouldn’t fly.

JAL’s filing is the largest in the nation by a non-financial corporate company.

Previously, JAL was bailed out by the previous government party, The Liberal Party of Japan. They would supply funds to the company but never through a court structured process.

The Wall Street Journal reported that the close ties with the government party, along with lavish spending, brought JAL into financial troubles.

Many retired bureaucrats also worked for JAL, which kept the relationship tight between the company and the government. This process is known as amakudari, which means “descending from heaven.”

The bureaucrats developed routes for the airline that made no revenue for the company for years. The consequences were political gains and financial losses.

So now the company must restructure their $25 billion in debt. And although the Democratic Party led the company into filing for bankruptcy, they have agreed to supply JAL with $10 billion.

They also worked out agreements with JAL’s creditors to eliminate over $8 billion in debt. But JAL must take other measures to emerge from this bankruptcy successful. Company layoffs are also in the forecast, as JAL expects to cut 15,700 of their employees.

In addition to layoffs, retirees and current employees agreed to take large pension cuts totaling $11 billion.

The company’s shares will no longer be in the trading market, which will cut stockholders completely out. Individual shareholders will be most affected as they account for 60 percent of the common shares.

The company’s new chairman also told the Washington Post they were looking to enter into a partnership with a major US air carrier. Delta Air Lines and American Airlines are the front-runners, although no date has been set for a decision.

JAL said their operations will continue as normal. All customers’ mileage accounts will remain intact and the company will continue to honor their leasing agreements and fuel purchase obligations.