UPDATE 4-Govt plans pension cuts, bridge loan in JAL rescue

* Govt mulls legislation to force pension payout cuts

* State-owned bank to provide JAL with bridge loan

* Announcement timed ahead of H1 earnings report on Nov. 13

* Govt may use mediated debt restructuring scheme - sources (Updates with details, background)

By Nobuhiro Kubo and Stanley White

TOKYO, Nov 10 (Reuters) - Japan's government said it was considering legislation to cut the pensions of Japan Airlines Corp (9205.T) retirees and would use loans from a state bank to keep it operating while it seeks its fourth bailout since 2001.

Transport Minister Seiji Maehara said the government would present proposed legislation to forcibly slash pension payouts during the next regular session of parliament, which starts in January, if the airline could not get the retirees to support the cuts.

The state-owned Development Bank of Japan will supply bridge loans to keep the airline operating until it secures long term financing, Maehara said. JAL is waiting for a government-backed turnaround body to decide whether to recapitalise it with public funds.

"We recognise that JAL will face a cash problem this month," Maehara told a news conference.

"The government will take steps to ensure JAL won't run out of money and to solve the pension issue, which could be a big problem even if the ETIC (Enterprise Turnaround Initiative Corporation of Japan) decides to support the carrier."

JAL, Asia's largest airline by revenue, is headed for its fourth annual loss in five years, weighed down by $15 billion in debt and a bloated cost base, including a pension shortfall estimated at $3.7 billion as of March. [ID:nT349661]

The government has been considering legislation to push through reductions to pension payouts, aiming to get around current laws that allow retirees and employees to easily block such cuts if just one-third of them oppose. [ID:nT188821]

The government's announcement of plans to deal with the pension and financing issues were partly aimed at easing worries auditors might not sign off on JAL's first half earnings report scheduled for Friday.

"We know JAL will announce earings on Nov. 13, so it's books will have to be audited," national strategy minister Naoto Kan told reporters at a separate briefing. "We felt we needed to clear up the issue of bridge loans before then to ensure the airline continues to operate smoothly."

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