Japan Airlines Faces Up To Bankruptcy

Japan Airlines is facing the very real prospect of filing bankruptcy. The problem? The airline is carrying a staggering sixteen billion dollars in liabilities.

Japan Airlines is a unique company. It is a standard bearing company in Japan, a source of national pride and a perceived vitally important company. It is the equivalent of General Motors in the United States, a company that is far more important symbolically than it is financially.

Whereas General Motors has been bailed out once by the federal government, Japan Airlines has been saved no less than four times. Yes, four! After all that, the company is in trouble once gain and owes a staggering sixteen billion dollars in total debt. This time, however, the government is presenting strong indications that it will not save the company. Instead, it will suffer the dishonor of filing for bankruptcy. The government will make sure the planes fly and the company comes out of bankruptcy much like the government in the US did with GM and Chrysler.

Given this massive mess, you might think Japan Airlines is the laughing stock of the industry. The opposite is true. It is a tough market out there and all airlines know it. The idea that the company lost over a billion dollars a month is not a strange notion to many in the industry. Indeed, an interesting thing is happening.



Two American airlines, Delta and American, are trying to buy into the Japanese company. The reason? Asia is the one area where air travel is expanding. The Japanese company has the right to routes throughout the region that are going to become increasingly valuable over time. The investment is also smart in that it will give the companies access to the Japanese market which is lucrative when the world economy is not in the can.

The fact Japan Airlines is facing bankruptcy is certain a surprise, but it is not the end of the world. Like a phoenix, the company will be born again.

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