Japan Airlines (NYSE: JAL) filed for bankruptcy on Tuesday, causing one of the nation’s largest bankruptcies ever, according to Associated Press.
Japan Airlines, the largest Asian carrier, filed for protection from creditors under the Corporate Rehabilitation Law, which is Japan's version of Chapter 11, with the Tokyo District Court. The company owes 2.32 trillion yen ($25.6 billion) in debt.
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Japan's flagship airline will cut nearly 16,000 jobs, reduce pensions for retired staff, eliminate routes and shift to more fuel-efficient aircraft as part of its reorganization.
The government will infuse close to $10 billion to keep JAL's planes in the air during the reorganization. Lenders will forgive $8 billion in debt, and JAL shares will be removed from the Tokyo Stock Exchange on Feb. 20, wiping out investors.
A state-backed turnaround agency pledged 900 billion yen ($10 billion) in financial support for JAL -- 600 billion yen in credit lines and a 300 billion yen cash infusion. The bankruptcy is the fourth-largest in Japan, according to figures from Teikoku Databank, which tracks corporate failures.
JAL President Haruka Nishimatsu resigned. Kazuo Inamori, the founder of Kyocera Corp. and Japan's No. 2 mobile carrier KDDI Corp., has been tapped as its next leader.
The carrier will retire all 37 of its Boeing 747 jumbo aircraft and 16 MD-90s, which will be replaced by 50 small and regional jets. As of March, JAL's fleet consisted of 279 aircraft, mainly from Boeing Co. It served 220 airports in 35 countries and territories, including 59 domestic airports.
JAL shares, which have lost more than 90 percent of their value over the last week, tumbled another 40 percent Tuesday to 3 yen before finishing flat at 5 yen. The company is now essentially worthless, with a market capitalization of about 13.7 billion yen ($150 million) -- the price of one Boeing 787 jet.
Despite the financial troubles, American and Delta have continued to battle over JAL.
Delta and its SkyTeam partners have offered $1 billion, including $500 million in cash to lure JAL away from American's oneworld alliance. American Airlines and its partners say they would inject $1.4 billion cash into the Japanese airline.
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