Japanese Government Will Not Guarantee JAL Loans

The government will not provide a guarantee on loans and other funding to Japan Airlines Corp., Finance Minister Hirohisa Fujii said Tuesday as the cash-strapped airline seeks a bailout using public funds to keep itself afloat.

But transport minister Seiji Maehara emphasized that the government will stick to its earlier pledge to ''firmly support'' Japan's top airline regardless of whether state guarantees are extended or not.

The government was considering providing such financial assistance to the struggling airline in the second extra budget for this fiscal year or in next fiscal year's budget starting in April, but Fujii told a news conference that the government has no such plans since JAL is ''a private company.''

''It is heading in that direction,'' Fujii said at a news conference when asked whether the government would no longer consider such assistance even outside the fiscal 2010 budget.

Last month, the state-owned Development Bank of Japan extended a pool of around 100 billion yen to the airline to keep it operational amid widespread understanding that the government would provide a guarantee at a later phase.

''It is extremely important for a private company to make its decision independently,'' Fujii said, when asked about the change in government policy.

''It is not acceptable for the government to intervene (in the affairs) of a private bank,'' he added.

Meanwhile, Maehara, Minister of land, infrastructure, transport and tourism, said at a separate news conference that opinion was divided among Cabinet members on whether it is necessary to attach a guarantee on loans provided by the DBJ since its shares are already owned 100 % by the government.

''There are people who say money borrowed from the DBJ is equivalent to state-guaranteed (funds),'' Maehara said.

JAL, headed for its fourth annual loss in five years, is also seeking broader and longer-term financial support from a government-backed corporate turnaround body -- Enterprise Turnaround Initiative Corp. of Japan -- which is able to raise up to 1.6 trillion yen in government-guaranteed funds.

ETIC is able to purchase debt, invest in and provide loans to companies saddled with liabilities deemed excessive, and has 20 billion yen in start-up capital, with half contributed by the government and the rest by about 130 private financial institutions.

''Regardless of whether there is a state guarantee or not, I understand the government will firmly support JAL during its turnaround process to avoid any interruption to its operations,'' Maehara said