Japan Transport Min to brief about JAL bailout plans

Japan's national flag and Japan Airlines' flag are displayed at the...

Japan's transport minister will brief about plans to revive Japan Airlines Corp on Thursday, with investors keen to see if the government will announce the use of public funds to bail out the struggling carrier.

The government has been aiming to come up with a blueprint this week for restructuring JAL, which is headed for its fourth annual loss in five years, weighed down by $15 billion in debt and a bloated cost base.

The plan will likely include the use a new state-backed corporate turnaround body to help JAL restructure its debt and provide it with an injection of capital.

The body, called the Enterprise Turnaround Initiative Corp (ETIC), is able to tap up to 1.6 trillion yen ($17.63 billion) in state-guaranteed funds until next March.

Transport Minister, Seiji Maehara, will brief on the government's plans for JAL at 3.45 p.m. (0645 GMT), the transport ministry said. That will be followed by a briefing at 4.10 p.m. (0710 GMT) by a government-appointed task force of turnaround specialists that have been working on a JAL restructuring plan,

"JAL's operation covers more than a half of Japan's sky and considering its global network and how it connects regional economies, its revival is extremely important for Japan's economy as well as for our policy," Maehara said during a parliament session earlier on Thursday.

JAL shares jumped 8 percent to 121 yen, in contrast with a 2 percent decline in the Nikkei average.

The Nikkei business daily said the government was considering a new law forcing the reduction of pension benefits to retirees of the struggling airline if it receives public funds, which would address one of the key hurdles to its survival.

A JAL official said the airline is not in a position to comment on the Nikkei report.

Domestic media have said JAL may need some 800 billion yen ($8.8 billion) for future retirement and pension payments, exceeding the 408 billion yen balance in its corporate pension system.

Senior Vice Finance Minister Naoki Minezaki said on Thursday the government cannot guarantee bridge loans to the troubled carrier without assurances it will reduce legacy costs.

The government plans to submit legislation to parliament next year, though differing views within the government make it unclear what provisions the bill will contain, the Nikkei said.

Another proposal being weighed is for the state-owned Development Bank of Japan to provide 200 billion yen in loans needed by JAL by the end of 2009 and for the state to guarantee the loans once the legislation is passed, the Nikkei said.

The proposal will also likely to include plans to support the overall aviation industry such as a reduction in airport landing fees, the report said.

(Reporting by Nathan Layne and Mariko Katsumura; Editing by Edwina Gibbs)

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