Japan Airlines May Seek USD$2 Bln Govt Loan

Japan Airlines may seek about a JPY200 billion yen (USD$2 billion) loan from the government, a company source said, as Asia's biggest carrier struggles with a steep fall in travel demand.

Such a move would help the airline obtain ample cash as the recession has pushed travel demand to an unexpectedly low level and made it difficult to foresee the business outlook, the source said on condition of anonymity.

"We've been doing everything to reduce costs but it's not enough. The business climate is really tough and our revenues are falling to a worse-than-expected level," the source said.

But the source denied media reports that JAL has already applied for a loan from the state-backed Development Bank of Japan.

Under its emergency lending program, the Development Bank of Japan can provide up to JPY1 trillion in low-interest long-term loans to cash-strapped companies in the financial year to March 2010.

JAL, which like many other major airlines is suffering from the global economic downturn, has forecast a loss of JPY34 billion for the year that ended March 31.

JAL's smaller rival All Nippon Airways has predicted a loss of JPY9 billion for the last financial year.

World airlines are set to lose USD$4.7 billion this year as a result of the global downturn that has shrunk passenger and cargo demand, industry body The International Air Transportation Association (IATA) estimated at the end of March.

Shares of JAL, owned about 10 percent by foreign investors, closed down 0.5 percent at 197 yen, outperforming the benchmark Nikkei 225 index, which lost 2.4 percent.