Japan govt plans pension cuts, bridge loan in JAL rescue

By Nobuhiro Kubo and Taro Fuse

TOKYO (Reuters) - Japan's government said it was considering legislation to cut the pensions of Japan Airlines Corp retirees and use loans from a state bank to keep it operating while it seeks its fourth bailout since 2001.

Transport Minister Seiji Maehara said the legislation to forcibly slash pension payouts would be put to parliament in the next regular session starting in January if the government cannot secure the support of retirees, who until now have strongly opposed proposed cuts.

Maehara said the state-owned Development Bank of Japan would provide bridge loans to keep the airline in operations as it awaits longer-term financing from a government-backed turnaround body now weighing whether to inject it with capital.

The government will not guarantee that loan, Maehara said.

JAL, Asia's largest airline by revenue, is headed for its fourth annual loss in five years, weighed down by $15 billion in debt and a bloated cost base, including a pension shortfall estimated at $3.7 billion in March.

The government has been considering legislation to push through reductions to pension payouts, aiming to get around current laws that allow retirees and employees to block such cuts if one-third of them are in opposition.

JAL needs to secure short-term financing to tide it over while the government-backed Enterprise Turnaround Initative Corporation of Japan (ETIC) deliberates on whether it will buy JAL's debt and use public funds to recapitalise it.

JAL applied to the ETIC last month, and a decision is not expected until January.