Meanwhile, airlines throughout the world are attempting to determine how the move will alter the shape of the market in Asia and on lucrative transpacific routes. ANA is one obvious potential beneficiary, though CEO Shinichiro Ito has expressed concern that "the market could be disrupted if discount tickets are offered as a result of JAL receiving public funds" (ATWOnline, Jan. 21). To ensure the carrier stays afloat through the bankruptcy process, it will have access to ¥900 billion ($9.9 billion) from the Enterprise Turnaround Initiative Corp. of Japan and the Development Bank of Japan, both of which are government-backed institutions.

But ANA may be boosted by JAL's planned route restructuring, which could see it back away from Asia flights it has had trouble operating profitably, Merrill Lynch Senior Analyst-Transport-Japan Yasuhito Tsuchiya said during a recent conference call. He commented that if JAL drops short-haul routes from Japan to points in Asia, ANA could fill the void. "On routes that JAL gave up in China in [late 2009], there is already evidence that ANA has benefited," he noted.

ML Analyst-Transport-Asia/Pacific Yingying Hou added that a "major downsizing of JAL's international route network" also could benefit Korean Air. "Seoul has emerged as Tokyo's main rival," she explained. "Japan already accounts for 16% of Korean Air's total passenger sales. . .up from 10% in 2008. A downsizing of JAL would allow Korean Air to grab an even larger slice of the Japanese market."

Of course, the biggest impact could come if the Tokyo carrier enters into a partnership with Delta Air Lines and switches from oneworld to SkyTeam. DL and oneworld's American Airlines have been jockeying to take a stake in JAL.

According to an analysis by ML, if JAL remains in oneworld and enters into an antitrust-immunized transpacific joint venture with AA, the Japan-US market would be 38% controlled by oneworld, 31% by Star Alliance and 30% by SkyTeam. But if JAL leaps to SkyTeam and enters into an ATI JV with DL, the Japan-US market makeup would shift dramatically: 61% SkyTeam, 31% Star and 6% oneworld.

"Oneworld is already extremely weak in Asia with JAL and Cathay Pacific as the only members," Hou said. If JAL leaves, "Cathay would be left with no one to cooperate with within an 8-hr. flight radius. . .Oneworld would have to woo another carrier in the region. Shanghai-based China Eastern is the most likely candidate."

The Centre for Asia Pacific Aviation stated in a recent analysis: "JAL's defection to SkyTeam would create a white spot in the north Asia market for oneworld, isolating passengers to Japan who travel to that nation as part of a broader itinerary to, say, China. British Airways' and American's access to the north Asian market would be weakened significantly if [the alliance] were not able to rely on the Japanese carrier for local distribution."

While there are numerous possible connotations beyond Japan's borders, the JAL revitalization effort first and foremost will play out in Japanese courts, a process that could take as long as three years. The form its restructuring has taken--a bankruptcy filing under Japan's Corporate Rehabilitation Law--was not anticipated prior to the Aug. 30 general election that saw the long-entrenched Liberal Democratic Party replaced by the Democratic Party of Japan.

DPJ leader and now Prime Minister Yukio Hatoyama campaigned on the theme that the LDP had been too friendly to business at the expense of taxpayers. Upon taking office in September, he and his transport minister, Seiji Maehara, questioned whether a JAL turnaround plan developed by the prior government would be effective. The LDP-approved plan was believed to have been predicated on a direct bailout from the government, slashing about 6,800 jobs and reducing international flying. Maehara immediately said he was "not convinced" it would work and directed JAL to go back to the "drawing board." He recently commented that the LDP "put off the [JAL] problem for too long," providing the airline with government money when necessary but never requiring radical changes.

CAPA Chairman Peter Harbison told Agence France Press that JAL's current dire fiscal state results from a "combination of years of protectionism, of being too close to government, of not taking the really difficult decisions. Not all of JAL's decisions [were] taken in a fully brutally commercial way."

Hatoyama and Maehara ultimately concluded that a direct taxpayer bailout would be neither politically acceptable in a country hit hard by the recession nor force JAL to make significant enough changes to ensure long-term viability. "It's important for JAL to depart from its government dependency," Hatoyama told reporters earlier this month. The Yomiuri Shimbun noted that "JAL's old headquarters in Tokyo's Marunouchi district were often mockingly referred to as 'a branch office of the transport ministry'."

Under the bankruptcy reorganization plan, JAL plans to cut about 15,600 jobs, or well more than double the reduction called for in the prior plan, an example of the harsh measures the new government believes are necessary but that repeatedly have been "put off."

Former JAL CEO Hakura Nishimatsu, who publicly stated his preference for a bailout over bankruptcy, resigned last week and was replaced by Kazuo Inamori, who conceded he is "a complete newcomer to the transport industry." But he is considered one of Japan's legendary business figures and, not insignificantly, was one of the DPJ's most vocal supporters in last summer's campaign.