Japanese Government Ready To Back JAL - PM

September 30, 2009

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Japan's prime minister and transport minister said on Wednesday the government was ready to support Japan Airlines, aiming to dispel worries over the viability of the loss-making carrier.

The public statement of support came after at least two companies showed reluctance to do business with JAL.

An Australian insurance company has refused to offer its guarantee to refund JAL's tickets in case the airline goes bankrupt, according to a JAL spokesman. A British credit company, meanwhile, has stopped accepting transactions to issue JAL tickets, according to a transport ministry official.

"Recent media reports about JAL have fuelled concerns," Transport Minister Seiji Maehara told a news conference on Wednesday.

"I believe JAL still has more than enough reserve power, but in case the worst happens, the government will back it up."

Prime Minister Yukio Hatoyama told reporters that the state would be willing to step in if the company were to fall into trouble, but that he didn't expect it to come to that.

"I hope JAL can rebuild itself on its own, and I think it can," said Hatoyama, leader of the Democratic Party, which took power in a landslide election last month, defeating the long-ruling Liberal Democratic Party.

JAL, swamped by USD$15 billion of debt and headed for its second straight annual loss, asked the government for a bailout last week, but Maehara withheld his support on concerns the airline's cost-cutting plans would not go far enough.

The transport minister set up a special task force to put together a turnaround plan for the struggling carrier by the end of November.

(Reuters)