American Airlines and its partners in the Oneworld alliance sweetened their offer to Japan Airlines <9205.T> to $1.4 billion to keep the struggling national carrier from joining hands with rival Delta Air Lines .

The announcement came as JAL shares plunged 45 percent to a record low, wiping out nearly $900 million in market value, on growing expectations the airline is headed for bankruptcy and a delisting from the Tokyo exchange.

The carrier, weighed down by $16 billion in debt and mired in losses, said on Tuesday it had secured enough support from retired workers for pension benefit cuts, which was required for it to qualify for a much-needed injection of public funds.

The state-backed fund plans to put about 300 billion yen ($3.3 billion) in fresh capital into JAL, provided it files for bankruptcy and its banks agree to waive about 350 billion yen in debt, sources told Reuters last week.

The fund, the Enterprise Turnaround Initiative Corp of Japan (ETIC), is leaning toward delisting JAL after the bankruptcy filing and is not planning to accept investment from either either Delta or American until a new management is in place, if ever, a source said.

With all the media reports there's a lot of talk going around about JAL delisting or staying listed, said Toshihiko Matsuno, a senior strategist at SMBC Friend Securities. Investors don't know what to think any more.

JAL shares closed at an all-time low of 37 yen, giving it a market value of $1.1 billion, barely a fifth of what it was worth four months ago. Although Asia's biggest airline by revenues, JAL has fallen to No.16 by market value among major airlines in the region, between Malaysia's AirAsia and India's Jet Airways , Thomson Reuters data shows.


Japan's top three banks, Mitsubishi UFJ Financial Group <8306.T>, Mizuho Financial Group <8411.T> and Sumitomo Mitsui Financial Group <8316.T>, have basically agreed to the ETIC's plan, Transport Minister Seiji Maehara said on Tuesday.

I met with the heads of the three megabanks this morning and explained to them about a public-led restructuring and asked for their support. I got mostly positive responses, Maehara said.

Even as JAL appears headed for a court-led restructuring, American and Delta have been courting it with rival offers of financial aid, eager to gain access to its routes to fast-growing Asian markets and a stronger foothold in Japan.

American said on Tuesday that it, private equity firm TPG and other Oneworld alliance members would invest up to $1.4 billion in JAL, $300 million above their previous offer, to keep JAL from defecting to Delta and the SkyTeam group.

The offer is composed of $1.1 billion from TPG and $300 million in equity from Oneworld partners, which includes British Airways , Qantas Airways and Cathay Pacific Airways <0293.HK>.

We believe our proposal is in the best interests of JAL and its employees and customers, and the government and taxpayers of Japan, American CFO Tom Horton told reporters in Tokyo.

It provides JAL and the government with the greatest long-term value with the lowest risk and most stability.

Horton said Oneworld would be happy to form a business alliance without capital ties if that was what was sought by the government.


JAL said on Tuesday it had secured support from two-thirds of nearly 9,000 retirees for proposed pension cuts, paving the way for it to slash its pension shortfall and avoiding having its pension fund dissolved in bankruptcy court.

The shortfall had ballooned to about $3.6 billion as of March last year due to high interest rates promised on pension reserves, a problem shared by many other companies in a country where interest rates have been pegged near zero for years.

JAL's success could embolden other firms to seek cuts.

In the past the thinking was that you could not cut the claims of pension recipients, but with this that may have changed, said Nobuhito Sawasaki, a lawyer at Anderson Mori & Tomotsune.

Today's decision by JAL will set an example and could be a precedent for other companies with a similar problem, he said.

JAL had already won the support of current employees last week for a halving of their payments but took until the Tuesday deadline to secure the agreement of two-thirds of retired workers, who had been asked to swallow a 30 percent cut.

The ETIC had planned to allow JAL's pension fund to be dissolved if the airline was unable to get support for the cuts on its own, which would have forced employees and retirees to accept even larger cuts, a source with knowledge of the matter said.

The cuts are still expected to leave JAL with a pension shortfall of around 100 billion yen. Dealing with the remaining liability could increase the burden on creditors, adding to the 350 billion yen in debt relief, the source said.

($1=92.14 Yen)

(Additional reporting by Nathan Layne, Taiga Uranaka and Chikafumi Hodo; Editing by Michael Watson, David Dolan and Lincoln Feast)