TOKYO —

The government outlined rescue measures for Japan Airlines Corp on Tuesday that include a reduction in the company’s generous corporate pension benefits and bridge loans by a state-owned bank to keep the cash-strapped airline operational.
   
Transport minister Seiji Maehara said the government is considering special legislation to ensure mandatory pension cuts, which would effectively pave the way for the injection of public funds.
   
But the announcement at a hastily arranged press conference lacked crucial details on the feasibility of the measures as the government rushed to disclose them before Japan’s top airline reports its earnings results for the April to September period on Friday.
   
‘‘The government will firmly carry out measures to ensure there is no disruption to JAL’s safe and stable operations,’’ Maehara, minister of land, infrastructure, transport and tourism, told reporters.
   
Maehara said the state-owned Development Bank of Japan will independently provide bridge loans to JAL on the premise that the government will attach a government guarantee at a later phase, and called on private creditor banks also to take part in providing the short-term financing.
   
Sources familiar with the matter separately said JAL’s main creditor banks including the DBJ are eyeing providing in total around 80 billion yen in loans by the year-end.
   
While the DBJ loans will not be guaranteed by the government, private creditor banks—including Mizuho Corporate Bank, the Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp—are expected to agree to offer about 25 billion yen in loans after obtaining a guarantee from the government-backed Japan Bank for International Cooperation.
   
‘‘Behind this (government) agreement is the understanding that it is necessary, from the viewpoint of the Japanese public and the economy as a whole, to provide the bridge loans to carry out drastic reform,’’ Deputy Prime Minister Naoto Kan, also state minister for national policy, told reporters.
   
The government is also considering a new framework to attach state guarantees under which JAL can apply for support from the transport minister in cases where financial shortages jeopardize the continuation of its businesses. Budget and legal arrangements will then be made to guarantee the funding following negotiations with related ministers.
   
Maehara had been pressed with a deadline to announce a bailout package before JAL’s anticipated dismal first-half earnings results, in a move meant to allay growing credit fears with a solid pledge to provide necessary backup to maintain lifeline operations.
   
The airline, saddled with heavy debts, projects its fourth annual loss in five years as it inches closer to receiving its fourth government bailout in less than a decade.
   
In a written statement signed by five cabinet members including Finance Minister Hirohisa Fujii, the government confirmed that public funds will not be used to fund JAL’s high-cost pension system.
   
Maehara said the legislation may be put to the Diet at an ordinary session expected to be convened in January, but added the legal measure will only be taken if JAL fails to obtain the majority consent of its retirees to drastically reduce pension benefits.
   
The company has long been criticized for the generous pension benefits it pays, which average around 250,000 yen a month per person, nearly three times the amount provided by rival All Nippon Airways Co.
   
JAL aims to reconstruct itself under a government-backed corporate turnaround body, the Enterprise Turnaround Initiative Corp of Japan, but the government plans to pump in cash to aid the airline until the entity formally decides on the long-term financial measures in a process likely to take at least until January.
   
A recently launched government team Maehara heads had been scrambling to iron out the details on how to trim JAL’s high pension benefits, deemed a key precondition for the company to receive additional loans from reluctant creditor banks.
   
Sources have earlier said the government is also considering other broad aid measures including a reduction in high landing fees and aviation fuel taxes, which have weighed heavily on Japanese airlines.

© 2009 Kyodo News. All rights reserved. No reproduction or republication without written permission.

› Login to comment

3 Comments

• 

  gogogo at 11:17 AM JST - 11th November

  including pension cuts

  Some heads should be rolling over that one

• 

  stirfry at 01:42 PM JST - 11th November

  true, but heads never roll in japan...they just bow and do their patented fake crying on tv, and its all forgotten

• 

  knews at 01:33 AM JST - 12th November

  250,000 yen a month sounds like the minimum one would hope to receive on retirement from one's company. Add that to the 200,000 yen from the National Pension (about the maximum possible and based on paying into it for 40 years) and you can probably get by. But if it's true that ANA employees only get a third of what JAL offers, that is peanuts.

Register or Login to leave a comment