Japan Airlines to be domestic carrier

The Japanese government is discussing an option to strip debt-ridden Japan Airlines of its international operations to enable it to survive as a domestic carrier, a newspaper reported on Thursday. It calls for rival All Nippon Airways to take over JAL's international flights as part of its downsizing scheme, the Mainichi Shimbun said. The scheme was apparently on the table when key cabinet officials, including transport minister Seiji Maehara, met on Wednesday to discuss JAL's rehabilitation programme. But the transport ministry is strongly opposed, despite growing calls for a drastic restructuring of JAL's international operations where losses weigh heavily on the airline, the newspaper said. '[JAL] will be a good company if it abandons international routes and concentrates on domestic flights,' an unnamed JAL executive was quoted by Mainichi as saying. In a related move, Maehara held talks with vice-prime minister Naoto Kan and other officials on Saturday and agreed that the state-run Development Bank of Japan will expand loans to JAL from its early offer of 100 billion yen [$1.08 billion], Jiji Press said. The DBJ has already disbursed 55 billion yen of the credit line extended in November. 'On top of the remaining 45 billion yen, [DBJ] is to expand the limit,' Maehara told reporters, according to Jiji. Cabinet officials will discuss details of further loans to JAL on Sunday before making an official announcement, Jiji added. JAL, battered by the global recession and swine flu pandemic, is scrambling to slash costs and is seeking its fourth government bailout since 2001 to keep flying in the face of mounting losses. Shares in Asia's biggest carrier plunged to a record low on Wednesday as media reports that bankruptcy is one option for the cash-strapped carrier spooked investors. The Tokyo stock market was closed for a holiday on Thursday. Local media have reported that the state- backed Enterprise Turnaround Initiative Corp, which is overseeing JAL's restructuring, is considering the possibility of the carrier filing for protection from creditors. It has also been offered financial assistance by both American Airlines and Delta Air Lines, who are competing to take a minority stake in the Japanese carrier, eyeing its coveted Asian landing slots. JAL, which lost about $1.5 billion in the six months to September, has said it plans thousands of job cuts and a drastic reduction in routes as part of its efforts to return to profitability.