Japan Airlines, a once-venerable flag carrier now crippled by massive debts, was expected to file for bankruptcy protection Tuesday in one of the country's biggest corporate failures in decades.
Asia's biggest airline is set to keep flying with billions of dollars in new official aid, but Japan's centre-left government has mandated a painful restructuring that will reportedly see one-third of JAL's workforce depart.
The carrier was believed to be on the verge of seeking court protection from creditors and delisting its shares from the stock exchange, becoming one of the highest profile victims yet of Japan's economic woes.
With estimated debts of about two trillion yen (22 billion dollars), a JAL bankruptcy would be the biggest failure outside the financial sector since World War II, according to Tokyo Shoko Research, an advisory firm.
JAL shares plunged to an all-time low of just four yen (four US cents) Tuesday morning, reducing the market value of the group to just 120 million dollars, equivalent to about half the cost of a new jumbo jet.
While Tokyo says JAL will continue to operate flights during the restructuring, equity investors are expected to lose most or all of their money if the company goes bust.
"The government has prepared various support measures," transport minister Seiji Maehara told reporters. "We want to help (JAL) to recover while operating safely," he added.
The government has tapped Kazuo Inamori, a 77-year-old entrepreneur and ordained Buddhist monk, to run the stricken airline during its overhaul.
Inamori is one of Japan's most respected business executives and management gurus, having founded both high-tech parts supplier Kyocera Corp. and a company that later became part of KDDI Corp., now Japan's number two telecoms firm.
Eyeing its lucrative Asian landing slots, US carriers American Airlines and Delta Air Lines are now in a bidding war for a slice of JAL.
Dutch carrier KLM said on Monday that talks involving Air France-KLM and Delta on JAL's future were "going well", after reports that the Japanese airline had agreed to tie up with Delta and switch to the SkyTeam alliance.
The government was expected to announce Tuesday a new financial lifeline for JAL, which has received a series of public bailouts and lost about 1.5 billion dollars in the six months to September.
JAL is reportedly set to slash more than 15,000 jobs -- about 30 percent of its payroll -- while withdrawing from unprofitable routes and selling assets such as hotels in a bid to return to profitability.
Experts say radical downsizing is long overdue at JAL, which has been hobbled by high costs since its days as a state-owned flag carrier and is overexposed to unprofitable domestic and overseas routes.
"The problem is that the government lacks a clear vision on what to do with JAL's international network," said Yasuhiro Matsumoto, a credit analyst at Shinsei Securities. "They are focused on assisting JAL."
According to Japanese media, the company is set to receive an injection of government funds worth several hundred billion yen (several billion dollars) under a prepackaged restructuring plan that would see it file for bankruptcy.
At the same time JAL's creditor banks are expected to be asked to forgive loans worth several hundred billion yen.
Some analysts questioned whether Japan needs two major airlines operating international flights, noting that smaller rival All Nippon Airways is more efficient.
"ANA has more solid management. It would be better that the stronger company takes charge of the job and less public help would be needed," said Matsumoto.
JAL has been hit hard by industry turbulence unleashed by the September 11, 2001 terror attacks in the United States, the Iraq war and the global financial crisis, as well as global health scares in the past decade.