Japan Airlines (JAL) goes bankrupt
One of Asia's biggest airlines, Japan Airlines (JAL), has filed bankruptcy. The company ran into losses due to inefficient cost control. It is expected that some 15, 000 plus people will loose their jobs.
JAL OR Japan Airlines, the country’s flagship carrier has filed for bankruptcy protection. This is one of the biggest air carriers of Asia.
JAL was originally a government controlled company which was later privatized. It looks like the company has run into losses due to inefficient cost control. It is expected that some 15, 000 plus people will loose their jobs. This will a big blow to its employees since the job market is very bad currently.
JAL has already closed some of its domestic routes and has been switching to smaller and fuel efficient aircrafts for quite some time. The state-backed Enterprise Turnaround Initiative Corporation (ETIC) will help the company reorganize under its supervision.
All of a sudden the airlines’ shares have fallen to an all time low giving another blow to the airline and its shareholders. JAL is $25.6 billion in debt. While the turnaround plan backed by the government will see the airline continue to fly, investors in the company are likely to lose most of their money. The Japanese government should make the decision to take complete responsibility and support the airline in full or totally let go and let free economy take its way.
Most of the problems which JAL is facing today are because of its legacy of crippling bureaucracy and bad decisions. In November of 2009 JAL was flying 95 routes with a two third of its domestic flights when occupancy rates were less then 60 percent. This is not profitable for any airline. JAL had too many excess routes and aircrafts in comparison to the demand.
JAL has already closed some of its domestic routes and has been switching to smaller and fuel efficient aircrafts for quite some time. The state-backed Enterprise Turnaround Initiative Corporation (ETIC) will help the company reorganize under its supervision.
All of a sudden the airlines’ shares have fallen to an all time low giving another blow to the airline and its shareholders. JAL is $25.6 billion in debt. While the turnaround plan backed by the government will see the airline continue to fly, investors in the company are likely to lose most of their money. The Japanese government should make the decision to take complete responsibility and support the airline in full or totally let go and let free economy take its way.
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