JAL files for bankruptcy

TOKYO (Reuters) – Japan Airlines Corp filed for bankruptcy protection on Tuesday, owing more than $25 billion, and vowed to slash 15,700 jobs and unprofitable routes as it tries to survive volatile fuel costs and fickle flyers.

Shareholders will be wiped out and creditors will forgive 730 billion yen in debt, including a 350 billion yen debt waiver from banks, as part of the deal with the fund, the Enterprise Turnaround Initiative Corp of Japan (ETIC).

Bankruptcy will only be the beginning for an airline with depleted capital, facing headwinds such as rising fuel prices and shrinking passenger numbers, on top of hefty restructuring costs.

JAL, which has now been bailed out by the Japanese government four times in the past 10 years, will replace many of its older and less fuel-efficient planes. It also faces tough decisions about foreign capital and alliances.

…Fuel hedging contracts may also be affected by a bankruptcy filing. JAL uses mostly Brent forward contracts and about 40 billion yen is estimated to be exposed in the event of an automatic termination, a source familiar with the matter said.

Reuters