JAL applied in late October for a bailout from the Enterprise Turnaround Initiative Corp of Japan (ETIC), an organization of turnaround specialists that can draw on state-guaranteed funds to offer aid to ailing firms.
The ETIC has proposed to JAL creditors that the carrier's restructuring include it filing for bankruptcy protection under the Corporate Rehabilitation Law, a process similar to Chapter 11 in the United States, sources have told Reuters.
Normally that would lead to a complete reduction of capital, wiping out the value of a company's shares.
But the ETIC is considering a plan under which some share value would be retained, allowing JAL to keep its listing on the Tokyo Stock Exchange, the person said, speaking on condition of anonymity as no final decisions have been made.
The ETIC is worried about the damage to JAL's business if it loses its listing, given the considerable number of individual investors that hold the carrier's shares, the person said.
The ETIC, which is expected to make a decision on whether to support JAL later this month, declined to comment.
A decision on whether JAL would be allowed to go through bankruptcy proceedings with a partial reduction of capital would ultimately be up to the court, the person said.
The Tokyo Stock Exchange revised its rules in 2003 to allow companies that had filed for bankruptcy protection to retain their listing if they met certain criteria, one of which is that they do not implement a complete reduction of capital.
But until now no company that has applied for protection under the Corporate Rehabilitation Law has kept their stock listing. JAL would be the first case.
Even if JAL can hold on to its listing, the carrier's existing shareholders will likely see the value of their stock diluted significantly if wins the support of the ETIC and is recapitalized using public funds.
A government-appointed task force that had previously worked on JAL's restructuring before the airline applied to the ETIC had estimated JAL would need 300 billion yen ($3.22 billion) in fresh capital, or more than double its current market value of 240 billion yen.
JAL shares lost two-thirds of their value in 2009 amid investor worries over dilution and the risk of bankruptcy.
The stock surged 31 percent on Monday, bouncing back from a plunge last week on news the government had asked the state-owned Development Bank of Japan to double its credit line to 200 billion yen to keep the carrier from running short of cash.
The course of JAL's restructuring could hit talks with Delta Air Lines and American Airlines, both of which are courting JAL with promises of financial aid and revenue growth through partnering on overseas routes.
(Reporting by Nathan Layne and Yoshifumi Takemoto; Editing by Erica Billingham and Rupert Winchester)