Japan Airlines enters bankruptcy $26B in debt
Updated 17h 16m ago | Comments 4 | Recommend 2 E-mail | Save | Print | Reprints & Permissions |
Share
Yahoo! Buzz
Add to Mixx
More
Subscribe
myYahoo
iGoogle
More
By Kathy Chu, USA TODAY
HONG KONG — Japan Airlines, Asia's largest airline when measured by revenue, filed Tuesday for a court-supervised restructuring that would reduce its 47,000 employees by roughly a third and shed some money-losing flights.
The carrier and its units hold nearly $26 billion in debt, which makes the filing the largest bankruptcy in Japan's history outside of the financial sector, according to Tokyo Shoko Research. JAL will receive almost $10 billion in government loans and cash infusions to support its operations.
An airline once seen as a symbol of Japan's prosperity after World War II, JAL has grappled for years with costly employee benefits and high operating costs. The global downturn exacerbated JAL's woes because it became increasingly difficult to woo international travelers, says Mina Sawamura, an analyst at Moody's credit-rating agency.
"Japan Airlines has a large exposure to international passenger operations, which are more volatile than domestic services," Sawamura says.
Despite the filing, Delta Air Lines and American Airlines remain interested in a partnership with JAL. Both U.S. carriers have offered $1 billion or more to gain access to JAL's extensive routes throughout Asia. There was no sign Monday which U.S. carrier would win out.
TODAY IN THE SKY: JAL filing could spur global airline shake-up
WHAT'S NEXT: Delta, American Airlines still iinterested
JAL will continue flying during its restructuring. But its bankruptcy means that travelers may have fewer competitively priced flights into Asia or within the region, analysts say.
While foreign travelers may be just as content to choose another airline to get to their destination, "Japanese people prefer the Japanese airlines, so they'll be most affected," says Yasuhiro Matsumoto, a senior analyst at Shinsei Securities in Tokyo.
More than 30 travel routes are expected to be cut during JAL's three-year restructuring. Matsumoto expects the airline to pare unprofitable routes between Japan and Europe, as well as Japan and North America.
The airline may also trim flights into Brisbane and Sydney, Australia, as part of the bankruptcy proceedings, Russell Shaw, an analyst for financial firm Macquarie, wrote to clients last week.
In the short term, analysts expect JAL's troubles to provide a boon to business for competitors including Japan's All Nippon Airways.
"Some Japanese people might avoid a bankrupt company," Sawamura says.
Regional airlines such as Korean Air that fly to some of the same destinations as JAL could also provide a "low-risk alternative" for travelers, says Kevin Mitchell, chairman of the Business Travel Coalition, which represents corporate travel offices around the world.
Japan Airlines' bankruptcy: What it changes, what's next
Updated 5h 30m ago | Comments 12 | Recommend E-mail | Save | Print | Reprints & Permissions |
Enlarge By Kazuhiro Nogi, AFP/Getty Images
Share
Yahoo! Buzz
Add to Mixx
Facebook
Twitter
More
Subscribe
myYahoo
iGoogle
More
By Dan Reed, USA TODAY
American and Delta still want to partner with Japan Airlines although the Japanese carrier filed for bankruptcy protection on Tuesday.
Why would the two largest U.S. carriers and their partners be willing to invest up to $2 billion in cash, loans and promises of future revenue from joint ventures to ally with an airline in bankruptcy? It's a good question, especially when bankruptcy raises questions of timing and what the airline will eventually look like.
$26B IN DEBT: Japan Airlines enters bankruptcy
"Those who expect JAL's restructuring to be quick and easy are forgetting that the relatively easy Chapter 11 bankruptcies of both United and Delta took more than three years," says consultant Hubert Horan, whose career in airline management included a stint managing Northwest Airlines' Asian operations.
That won't be the case with JAL, he warns: "No Japanese company this big, this visible, this important, and this well-connected politically has ever gone into (bankruptcy). So I would expect this to be a long and messy process."
JAL's bankruptcy filing poses other questions for U.S. travelers, for airline interests and for the alignment of global airline alliances:
Q: What effect does JAL's bankruptcy filing have on U.S. travelers?
A: In the very near term, none. Later this year JAL will be begin eliminating service on some routes, and reducing flights and seats on others. That will push more passengers onto flights by Delta, United and All Nippon Airways.
Q: Wasn't JAL going to decide to stay with American and the Oneworld global airline alliance, or switch to Delta and its larger SkyTeam alliance?
A: The early assumption was that the Japanese government wouldn't allow JAL to enter bankruptcy. So the bids were made presuming that JAL needed a big cash infusion to stay out of bankruptcy. But the Enterprise Turnaround Initiative Corp., the state-backed investment fund managing JAL's restructuring, determined that the carrier's $26 billion of debt was too large to be dealt with outside of bankruptcy. Much of that debt will be wiped out, along with 17,000 JAL jobs and some of the lavish benefits paid to JAL retirees.
So the American and Delta offers will have to be re-tooled to address the new reality of a JAL that will be at least 30% smaller and in need of less cash from foreign investors.
Q:Does JAL's bankruptcy and restructuring tilt the field in favor of either American's or Delta's bid?
A: Definitely. The reduced need for immediate cash allows JAL to focus on long-term competitive concerns. That favors Delta. Teaming with the largest U.S. carrier in the trans-Pacific market to form a behemoth would provide JAL with more connecting passengers than it gets now or could hope to get in the future by partnering with American.
Q:How will the competitive balance among U.S. carriers be changed by what JAL does regarding a U.S. partner?
A: United Airlines is a clear winner. It and the Japanese carrier All Nippon Airways, or ANA, already have requested antitrust immunity to virtually merge their trans-Pacific units under terms of a new U.S.-Japan air services agreement reached in December.
American, a distant third behind Delta and United in the U.S.-Japan market, would be a winner if JAL stays in the Oneworld fold and forms a joint venture with American. The U.S.-Japan market would be split roughly in thirds.
Delta would be the huge winner if JAL picks it. It and JAL would have nearly half of the U.S.-Japan markets and a big piece of the U.S.-Asia market. American would be reduced to a bit player.
Q: Would consumers be hurt by a Delta/JAL and United/ANA duopoly?
A: Maybe in the short run. But never discount the willingness of airlines — and airline investors — to challenge other carriers' strongholds. It's hard to predict which carriers would try to squeeze into a market dominated by Delta-JAL and United-ANA. But anything's possible.
Q:If JAL switches to Delta and SkyTeam, how big of a blow would it be to American and Oneworld?
A: Huge. But don't count American and Oneworld out yet. If, as expected, American and British Airways, the other leading carrier within Oneworld, win antitrust immunity for their trans-Atlantic partnership, look for the Oneworld carriers to complete their global network by bringing China Eastern, based in Shanghai, into Oneworld.
Updated 5h 30m ago | Comments 12 | Recommend E-mail | Save | Print | Reprints & Permissions |
Enlarge By Kazuhiro Nogi, AFP/Getty Images
Share
Yahoo! Buzz
Add to Mixx
More
Subscribe
myYahoo
iGoogle
More
By Dan Reed, USA TODAY
American and Delta still want to partner with Japan Airlines although the Japanese carrier filed for bankruptcy protection on Tuesday.
Why would the two largest U.S. carriers and their partners be willing to invest up to $2 billion in cash, loans and promises of future revenue from joint ventures to ally with an airline in bankruptcy? It's a good question, especially when bankruptcy raises questions of timing and what the airline will eventually look like.
$26B IN DEBT: Japan Airlines enters bankruptcy
"Those who expect JAL's restructuring to be quick and easy are forgetting that the relatively easy Chapter 11 bankruptcies of both United and Delta took more than three years," says consultant Hubert Horan, whose career in airline management included a stint managing Northwest Airlines' Asian operations.
That won't be the case with JAL, he warns: "No Japanese company this big, this visible, this important, and this well-connected politically has ever gone into (bankruptcy). So I would expect this to be a long and messy process."
JAL's bankruptcy filing poses other questions for U.S. travelers, for airline interests and for the alignment of global airline alliances:
Q: What effect does JAL's bankruptcy filing have on U.S. travelers?
A: In the very near term, none. Later this year JAL will be begin eliminating service on some routes, and reducing flights and seats on others. That will push more passengers onto flights by Delta, United and All Nippon Airways.
Q: Wasn't JAL going to decide to stay with American and the Oneworld global airline alliance, or switch to Delta and its larger SkyTeam alliance?
A: The early assumption was that the Japanese government wouldn't allow JAL to enter bankruptcy. So the bids were made presuming that JAL needed a big cash infusion to stay out of bankruptcy. But the Enterprise Turnaround Initiative Corp., the state-backed investment fund managing JAL's restructuring, determined that the carrier's $26 billion of debt was too large to be dealt with outside of bankruptcy. Much of that debt will be wiped out, along with 17,000 JAL jobs and some of the lavish benefits paid to JAL retirees.
So the American and Delta offers will have to be re-tooled to address the new reality of a JAL that will be at least 30% smaller and in need of less cash from foreign investors.
Q:Does JAL's bankruptcy and restructuring tilt the field in favor of either American's or Delta's bid?
A: Definitely. The reduced need for immediate cash allows JAL to focus on long-term competitive concerns. That favors Delta. Teaming with the largest U.S. carrier in the trans-Pacific market to form a behemoth would provide JAL with more connecting passengers than it gets now or could hope to get in the future by partnering with American.
Q:How will the competitive balance among U.S. carriers be changed by what JAL does regarding a U.S. partner?
A: United Airlines is a clear winner. It and the Japanese carrier All Nippon Airways, or ANA, already have requested antitrust immunity to virtually merge their trans-Pacific units under terms of a new U.S.-Japan air services agreement reached in December.
American, a distant third behind Delta and United in the U.S.-Japan market, would be a winner if JAL stays in the Oneworld fold and forms a joint venture with American. The U.S.-Japan market would be split roughly in thirds.
Delta would be the huge winner if JAL picks it. It and JAL would have nearly half of the U.S.-Japan markets and a big piece of the U.S.-Asia market. American would be reduced to a bit player.
Q: Would consumers be hurt by a Delta/JAL and United/ANA duopoly?
A: Maybe in the short run. But never discount the willingness of airlines — and airline investors — to challenge other carriers' strongholds. It's hard to predict which carriers would try to squeeze into a market dominated by Delta-JAL and United-ANA. But anything's possible.
Q:If JAL switches to Delta and SkyTeam, how big of a blow would it be to American and Oneworld?
A: Huge. But don't count American and Oneworld out yet. If, as expected, American and British Airways, the other leading carrier within Oneworld, win antitrust immunity for their trans-Atlantic partnership, look for the Oneworld carriers to complete their global network by bringing China Eastern, based in Shanghai, into Oneworld.
Entradas
No hay comentarios:
Publicar un comentario