The Japanese government has effectively placed Japan Airlines under its control over fears that domestic aviation service would be thrown into chaos should JAL be forced to dramatically scale back flights or, cease to fly altogether.

Construction and transport minister Seiji Maehara has shown he will not hesitate to use public funds to rehabilitate JAL if circumstances warrant. At the same time, the government plans to ask JAL’s top management, rank-and-file employees and former employees to take on their share of the burden of corporate reconstruction.

At a press conference Maehara was asked why the government would get so involved in the resurrection of just one company. “Because JAL operates 60 per cent of the flights in the skies over this country,” the minister replied.

On 13 October, a government appointed task force presented a draft plan to Maehara, JAL and its major financing institutions, suggesting ways to revive the airline at banks’ expense. In the plan, the task force urged the Development Bank of Japan, Mizuho Corporate Bank, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corp and other banks to forgive or accept debt-for-equity swaps for 300 billion yen in debts.

The plan was angrily rejected by the banks. The draft plan also included suggestions to use tax money to help bail out the carrier, but this was flatly rejected by the government. After hearing the objections to the task force’s ideas, the government eventually decided that JAL’s reconstruction should be conducted under its control, not initiated by the task force, and that a framework should be established in which each party involved would share the burden of reconstruction.

Meanwhile, Delta Air Lines and American Airlines are stepping up their efforts to strengthen ties with Japan Airlines as both eye the Japanese carrier’s Asian network which they could access via alliance and code-sharing partnerships. Both Delta and American are said to be considering capital infusions into JAL as part of a proposed tie-up. The airline needs 180 billion yen (US$2 billion) in a bridging loan in November.

Delta has hired investment bank Goldman Sachs Group and publicrelations firm Fleishman-Hillard to advise it on a possible alliance with JAL, according to reports.