JAL tumbles to record low on bankruptcy jitters

TOKYO (Reuters) - Shares of Japan Airlines Corp slid to a record low on Tuesday on growing investor worries that Asia's largest airline by revenue could face bankruptcy as it struggles to agree pension cuts.

The slide was also fuelled by news that trading house Mitsui & Co sold all its 11.7 million JAL shares, raising speculation other shareholders would follow suit.

JAL President Haruka Nishimatsu asked retirees and employees on Monday to accept an average 40 percent cut in their pension payouts and warned that a failure to agree on cuts could push the carrier to a court-led restructuring.

The stock closed at 87 yen after earlier dropping to as low as 85 yen, the lowest since a relisting in 2002. More than 82 million shares changed hands, three times the daily average over the past three months.

JAL's stock has more than halved in value this year and has tumbled 15 percent since Nov. 17 after Transport Minister Seiji Maehara rattled investors by saying bankruptcy was still a possibility for the airline.

"Maehara has said bankruptcy is not entirely ruled out, and many retirees appear to disagree with the pension cuts," said Takashi Ushio, head of investment strategy at Marusan Securities. "GM went into bankruptcy to deal with a very similar situation."

JAL's 5-year credit default swaps , instruments used by investors to insure against the risk of a company failing, are quoted above 2,300 basis points this week, having climbed steadily from about 800 in mid-September.

The level is several times the benchmark iTraxx Japan index series 12 at 143 basis points.

JAL's Nishimatsu said on Monday that he would seek to cut pension payouts by slightly more than 30 percent for retirees and more than 50 percent for employees, aiming to slice into a pension shortfall that reached 331 billion yen as of March.