Japan Air Lines, JAL, entered into bankruptcy in January 2010 as one of the worst bankruptcies in Japanese history with debts totaling over $28 Billion.  While in bankruptcy, they got a new Chairman Kazuo Inamori, an innovative founder of tech companies in Japan, and they also suffered massive route cuts and labor cuts (totalling over 16,000 people.) 

Their bankruptcy was financed by 11 creditors including the Development Bank of Japan and they’ve now exited bankruptcy into a disaster. 

I’m always struck by how the airline industry so often finds itself in a poorly timed event for airlines that just got over a previous disaster.  Japan, affected by its recent earthquake and resulting tsunami, is no longer a remotely attractive place to visit and even the highly downsized entity JAL is today can hardly be expected to survive what is by all accounts a massive downturn in demand.

It’s not just international flying.  Many places that are normally high demand domestic destinations are in disarray.  So, one wonders just how viable the latest version of this airline is?

JAL likely will only be able survive with more government support and this is a country that will be finding it difficult to pay for the recovery in front of them as it is.  But just as the terrorist attacks of September 11, 2001 were a massive, unpredicted event with both domestic and global implications, so is Japan’s recovery from the earthquake and tsunami.  It’s best to find a way to let this airline recover a bit more before passing judgement on whether it should even exist at all.  In the long run, let the markets decide.  In the short run, help this company out.

Filed under: Airline News by ajax