UPDATE 4-JAL falls to Q2 loss, more turbulence ahead

* Reports 32 bln yen net loss for July-September

* Gives no annual forecasts due to unclear outlook

* Applies for mediated debt restructuring

* Makes sense to stay with Oneworld - president

* Shares down 0.9 pct before results, Nikkei down 0.4 pct (Adds comments by president, analyst)

By Mariko Katsumura and Nobuhiro Kubo

TOKYO, Nov 13 (Reuters) - Japan Airlines 9205.T, which is seeking a state bailout, sank into the red last quarter amid sluggish travel demand, and applied on Friday for mediated debt restructuring in a bid to muddle through financial turbulence.

Saddled with $15 billion in debt, a massive pension deficit and dozens of unprofitable routes, JAL is seeking its fourth state bailout since 2001.

Asia's largest carrier by revenue said in its earnings report there was a great deal of uncertainty about its ability to continue as a going concern. It has applied for help to the Enterprise Turnaround Initiative Corp (ETIC), a government-backed turnaround fund. [ID:nT349661]

JAL fell to a group net loss of 32.2 billion yen ($357 million) in the July-September quarter after reporting a 40.1 billion yen profit for the same period last year.

Quarterly revenues fell 26 percent to 429 billion yen as the economic slowdown hit travel and cargo demand.

"We have a relatively big exposure to international business, and this sector was hit really hard by the global economic downturn," JAL President Haruka Nishimatsu told a news conference.

"I think we'll need to push forward the downsizing of our international business."

The struggling carrier, which earlier this year projected a net loss of 63 billion yen for the year to next March, did not give forecasts for the year due to uncertainties over its business outlook.

JAL said it has applied for debt restructuring under which a third party will mediate between the company and its creditors.

The scheme, called Alternative Dispute Resolution (ADR), would trigger a suspension of loan payments.

The government has pledged to enlist a state bank to offer bridge loans to prevent the carrier from running short of cash and keep it airborne. [ID:nT287070]

American Airlines Corp AMR.N and Delta Air Lines (DAL.N) have shown an interest in taking a minority stake in JAL to access its Asian network and get a stronger foothold in Japan. [ID:nBNG509104]

Nishimatsu said it makes more sense at the moment to stay with the Oneworld airline alliance, of which American is a member, rather than defecting to a rival group.

"Considering our past, continuing to stay as an American Airlines partner would make more sense. But there are also other conditions, so we would like to continue studying possibilities," he said.

"Moving to a different aviation alliance would be costly ... and would take about two years. We need to consider such factors as well."

Analysts say capital injections or additional financing alone would not improve the carrier's prospects due to its severely underfunded pension programmes.

"Even if everything goes smoothly (with the current plan) and JAL is able to tap the funds it wants from the ETIC, its turnaround will not happen overnight," Mizuho Investors Securities analyst Takahiko Kishi said.

"Its high cost structure and pension costs are just the beginning of its problems. Once it falls under state supervision, it will have to deal with additional issues, including political pressure to continue flying to regional airports."

Nishimatsu met with the leaders of JAL retirees' associations on Thursday to seek their approval on cuts in pension payouts.

Media reports said the leaders expressed their wish to cooperate in some way to save the airline, but many retirees are expected to strongly oppose having their pensions cut.

JAL's shares closed down 0.9 percent at 106 yen ahead of the results, underperforming the benchmark Nikkei 225 average .N225, which fell 0.4 percent. JAL shares have lost half of their value since the start of the year, while the Nikkei has gained 10 percent. ($1=90.18 Yen) (Reporting by Mariko Katsumura; Editing by Hugh Lawson)