Shares of Japan Airlines were flooded with sell orders on Tuesday on growing expectations the carrier is headed for bankruptcy and a delisting from the Tokyo exchange.
The sell-off, set to wipe out nearly $900 million in market value from JAL, came despite an announcement from American Airlines that it had sweetened its investment offer by $300 million to $1.4 billion to keep JAL from forging ties with Delta Air Lines.
A state-backed fund now weighing whether to support the carrier is planning to have it file for bankruptcy next week, provided banks agree to waive about 350 billion yen ($3.80 billion) in debt, sources have told Reuters.
Kyodo news agency said on Tuesday that Japan's top three private banks -- Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group -- had agreed to the bankruptcy plan.
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, he said.
JAL is still short of the two-thirds support it needs from retirees to cut pension payments, Japanese media reported this week, raising the prospect of its pension fund being dissolved in step with a bankruptcy filing.
The airline, Asia's largest by revenues, needs the agreement of two-thirds of its roughly 16,000 employees and 9,000 retirees for the cuts so it can reduce a pension shortfall estimated at 331 billion yen ($3.6 billion) at the end of March.
JAL has won the support of current employees for a halving of payments and is asking retired workers to accept by Tuesday a 30 percent cut.
But as of Monday only about half of the retirees had agreed to the plan, the Nikkei Business daily said.
JAL plans to extend its efforts to convince retirees to January 22 if it cannot get their support by the Tuesday deadline, media said.
A JAL spokesman said he did not have an update on how many retirees have agreed but said the firm would continue its efforts to persuade them beyond the deadline if it fails to secure consent by Tuesday.
AMERICAN, ONEWORLD RAISE INVESTMENT OFFER
JAL, weighed down by $16 billion in debt and mired in losses, applied in late October to the ETIC, a body of restructuring specialists that can tap state-backed funding to bail out ailing companies.
The ETIC plans to inject about 300 billion yen in fresh capital into JAL, provided it files for bankruptcy and creditors agree to waive around 350 billion yen in debts, sources told Reuters last week.
The ETIC is eyeing some time between January 19 and January 22 for the carrier to file for bankruptcy and for the ETIC to officially announce its plans to offer its support.
Even as JAL appears headed for bankruptcy, Delta Air Lines and American Airlines 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 and other Oneworld alliance members were prepared to invest up to $1.4 billion in JAL, $300 million above its previous offer, to keep JAL from defecting to Delta and the SkyTeam group.
The ETIC plans to have JAL's pension fund dissolved if the airline is unable to get support for the cuts on its own, likely triggering even larger cuts for employees and retirees, a source with knowledge of the matter has said.
Shares of JAL were untraded due to a flood of sell orders at 37 yen, down 45 percent from Friday's close. Japanese markets were closed for a national holiday on Monday.
JAL's market value had sunk below $2 billion as of Friday's close, from more than $6 billion a year ago and compared with smaller rival All Nippon Airways' $7.7 billion.
(Additional reporting by Nathan Layne, Taiga Uranaka and Chris Gallagher; Editing by Michael Watson)