In one of Japan’s biggest corporate failures, Japan Airlines has applied for protection from creditors under the Corporate Rehabilitation Law — Japan’s version of the US’ Chapter 11 — with the Tokyo District Court.

The axe has finally fallen at Japan Airlines (JAL) with the beleaguered carrier filing for court-protected bankruptcy and turning to Japan’s stateowned Enterprise Turnaround Initiative Corporation (ETIC) for restructuring support. In one of Japan’s biggest corporate failures, JAL applied for protection from creditors under the Corporate Rehabilitation Law — Japan’s version of the US’ Chapter 11 — with the Tokyo District Court.

ETIC has confirmed that it will provide the necessary support to JAL during the restructuring, and that it has brokered the funds required for the continued protection of commercial transaction claims; for the protection of passenger’s frequent flyers programme; and the protection of its aircraft leasing fees.

In addition, JAL will also be eligible for debtor-in-possession (DIP) financing from ETIC and the Development Bank of Japan (DBJ) for other expenses needed to keep the airline flying.

“The financial crisis that occurred in the fall of 2008 pushed the world economy into an unprecedented global recession and JAL Group also suffered a significant decline in sales due mainly to a decline in demand for international passenger service for business users and a sudden decline in demand for international cargo service,” JAL said in a press statement.

“As a result of such circumstances, in June of 2009, JAL Group received loans in the total amount of ¥100 billion (US$1 billion) from DBJ and other private financial institutions.”

The carrier, the largest in Asia, has accumulated debts of ¥2.32 trillion (US$25.6 billion) but said it believes its business revitalisation is feasible through the adoption of a number of key measures including: Fleet renewal replacing low-efficiency large aircraft with highefficiency small aircraft and restructuring under performing routes; workforce review and streamlining; optimising its business operations such as making its routes and schedules more flexible and responsive to market fluctuations; and continued but more focused investment in aircraft and IT systems.

JAL also said it would cut its work force to an “appropriate scale,” with Japanese news reports having said its turnaround would involve as many as 15,600 job cuts, or a third of its payroll, by March 2013.