JAL troubles test Japan government's resolve

By Roland Buerk BBC News, Tokyo

JAL executives bowed in apology announcing the bankruptcy

Japan Airlines has been struggling for years and has been bailed out repeatedly since 2001.

But this time the national flag carrier is getting what has been described here as "tough love", and that says a lot about Japan's new government and its priorities.

The Democratic Party of Japan (DPJ), led by Prime Minister Yukio Hatoyama, came to power last September, ending more than half a century of conservative dominance.

It promised to stop lavishing taxpayers' money on failing corporations, and instead direct the government's efforts to helping ordinary people, with allowances for families with children and free high school education.

The government is determined to expand the welfare state even though Japan already has the largest debt in the developed world.

The Diet, or parliament, convened this week to discuss the budget, which includes proposals to borrow more than the government receives in taxes.

It is the first time that has happened since the end of World War II.

Shareholder burden

The government has blamed the previous administration for much of JAL's problems, saying management was complacent because it was certain bailouts would come.

I though there was no way Japan Airlines would fail Akiko Saito, shareholder Can JAL be turned around?

Old habits die hard, of course, and Japan Airlines is not being completely cut loose.

The Enterprise Turnaround Initiative Corporation, a state-backed body with access to public funds, is going to pump in billions of dollars.

JAL's rival All Nippon Airways is not benefiting from the same largesse.

Banks will have to waive unsecured debt and JAL's shares will be delisted from the Tokyo Stock Exchange by 20 February, wiping out remaining investors.

The prime minister has said shareholders would have to bear some responsibility.

The price had already fallen from more than 200 yen a year ago to an intra-day low of 3 yen this week.

That means the airline, Asia's biggest by revenue, is now worth rather less than a single jumbo jet.

Lost symbol

The staff too will pay a heavy price.

A third of JAL's workforce, more than 15,000 people, will be shed over the next three years.

Pensioners had already agreed to 30% cuts in their payouts.

Waiting for customers...

The government says that the airline's planes will stay in the skies, tickets will still be honoured as will frequent flyer miles.

And it is providing payment guarantees to suppliers, although the long term future for some could be grim.

For decades the airline was a symbol of Japan's economic success as it carried tourists all over the world.

It will emerge from the long process of restructuring smaller, leaner and the plan is, profitable.

Something like this has been on the cards for months, but the national flag carrier filing for bankruptcy protection is still a shock for some.

"I though there was no way Japan Airlines would fail," said Akiko Saito, a 63-year-old shareholder who was checking in to a flight at Tokyo's Haneda Airport when the company announced its plans.

"I was convinced it would recover so I still have my stocks."

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