Global Airport News

Japan's transport minister declined to rule out a court-led bankruptcy for Japan Airlines, sending the struggling carrier's stock to a record low, even as US carriers lined up with offers of investment.

Delta Air Lines said it and its partners in the SkyTeam alliance were ready to offer a total aid package of USD$1 billion, including a USD$500 million capital investment from SkyTeam members, to get it to defect from the rival Oneworld alliance.

Delta's offer of support followed an announcement last week by American Airlines, JAL's partner in Oneworld, that US private equity firm TPG was prepared to partner it in an investment in JAL.

The Nikkei newspaper reported earlier on Wednesday that TPG was ready to invest JPY100 billion yen.

JAL's stock closed down 3.9 percent at 98 yen after sliding to 94 yen, its lowest level since re-listing in 2002.

Investors sold after the nation's transport minister said that he would not rule out a court-led bankruptcy for JAL, which is seeking a bailout from a government-backed turnaround fund.

"I have never said a court-led bankruptcy is impossible," Seiji Maehara told parliament, explaining that in previous remarks he has said the airline should not be allowed to fail or liquidated but had not ruled out a court-led restructuring.

In addition to USD$500 million in capital from SkyTeam members, Delta said its aid package would include USD$300 million in guarantees on any short-term revenue loss and USD$200 million in asset-backed financing from Delta.

The chief financial officer of American Airlines' parent AMR said last week that American could partner with TPG on an investment in JAL, but had not disclosed how much it might be willing to invest.

"The best scenario for JAL is to rebuild itself with help from the government and foreign airlines," said Kotaro Toriumi, an airline analyst. "But making a fresh start after a court-led bankruptcy could be an option too," added Toriumi.

TPG would be willing to buy up to JPY100 billion worth of common and preferred shares from JAL, the Nikkei said.

A source familiar with TPG's thinking said after the Nikkei report that the private equity firm was still in the early stages of exploring a possible investment in JAL, and no decisions on the amount or other details had been made.

It was also unclear if TPG would be able to make such an investment.

Japan Airlines has a market value of about USD$3 billion, and under current laws the total stake of non-Japanese persons or entities in an airline is capped at one-third in terms of voting rights.

American Airlines has outlined a separate offer to JAL that includes a JPY30 billion investment, the Nikkei said.

American is keen to keep JAL as its partner in the Oneworld alliance and prevent it from joining with Delta Air, which is holding separate talks with JAL on a capital investment and joining the rival Skyteam airline group.

JAL, headed for its fourth loss in five years, is seeking a fund injection from the Enterprise Turnaround Initiative Corporation of Japan, which is expected to take until January to decide whether the carrier is worthy of state aid.