Japan PM: Govt will back JAL

Tokyo - Japan's prime minister Wednesday promised government support to save struggling Japan Airlines in case its own restructuring effort fails.

Prime Minister Yukio Hatoyama said he was confident that Japan Airlines Corp. can turn itself around, but said the government would provide financial support "just in case" it faces a serious cash shortage.

"I'm confident that JAL can reconstruct on its own, and I would like to see that happen. But just in case, the government will provide support," Hatoyama told reporters.

"The airline has reportedly been in talks on financial tie-ups with several top airlines including Delta Air Lines Inc, the world's biggest airline operator, its rival American Airlines Inc and Air France-KLM, Europe's biggest airline group.

The government last Friday set up a team of corporate turnaround experts to create a restructuring plan for the airline. The five-member team will make a recommendation to the transport minister by early November.

JAL has submitted its own draft reconstruction plan, which included 6 800 job cuts, or about 14% of its workers, but failed to get a pass mark from its main banks and the minister.

JAL has asked for public funds for survival under a government aid scheme designed to rescue businesses that got into trouble because of the global economic crisis.

Some government officials have opposed an easy approval of aid for JAL, saying the former national carrier's slump is a result of structural problems rather than just the global crisis. JAL was privatized in 1987.

The airline incurred its biggest-ever quarterly net loss of ¥99bn ($1bn) in the three months to June, and has forecast a net loss of ¥63bn ($701m) for the current fiscal year to March 2010.

Its request for taxpayer money came months after it received ¥60bn ($668m) in loans from the government-owned Development Bank of Japan in June.

JAL has told the government that it's short ¥450bn debt repayment, according to media reports.

- AP