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Japan Airlines seeking, getting capital infusions

Back in October, we reported that Japan Airlines was ready to sell its credit card unit off to the highest bidder. Way back in June, we also reported that JAL, which carries 75 times more debt than operating profit on its balance sheets, might be looking for a debt-for-equity swap, though there could be some trouble getting that in order as anyone who wants to take a substantial equity stake in the firm would want to see a clear and detailed plan for returning to profitability.

Just before New Years, we learned that JAL was considering issuing somewhere between 100-150 billion yen worth of preferred shares to its creditors and business partners. The Nikkei, however, quoted Motokazu Yoshida, Mitsui’s senior executive managing officer, as saying, “Making an investment just out of sympathy will be difficult to do.”

In other words, JAL still needs to show what it’s planning to do with the extra cash, besides simply paying for layoffs and newer, smaller, more fuel-efficient airplanes.

Two days ago, it was reported that the Mitsubishi UFJ Financial Group would pay about 40 billion yen in order to acquire a 49% stake in Jalcard, JAL’s struggling credit card arm. How a firm manages to struggle in consumer credit is beyond us - especially when Jalcard is gaining about 10% in customer numbers year-on-year, but then again, JAL (together with ANA) operates in the deep red under a virtually government enforced monopoly, and so it shouldn’t be too difficult to see why they’re struggling.

Japan Airlines intends to raise somewhere in the neighborhood of 250-300 billion yen through the sale of assets. This will be a firesale worth keeping an eye on.

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