January 14, 2010 / 5:45 AM / 10 years ago

JAL failure would hit about 1,500 small firms: report

TOKYO (Reuters) - A Japan Airlines Corp bankruptcy will have a wide-spread impact on small businesses that account for half of the nearly 3,000 Japanese companies that do business directly with the carrier, a research firm said.

JAL, Asia’s biggest carrier, will likely file for bankruptcy protection next week as part of a state-backed rescue package, sources have told Reuters..

Tokyo Shoko Research said small firms with less than 1 billion yen ($10 million) in sales make up half of JAL’s major business partners, supplying goods to or buying from JAL’s 91 group firms.

“It’s highly likely these small companies will feel the pinch because they depend heavily on business with JAL,” said Kazufumi Masuda, a researcher at Tokyo Shoko, which tracks bankruptcy data.

“They could be forced to withdraw from certain business lines or shrink their businesses due to a gradual decline in sales.”

But companies are unlikely to face an immediate credit crunch, he said, because JAL’s debts will be secured under a court-led restructuring plan currently being hammered out.

The Enterprise Turnaround Initiative Corp of Japan, a state-backed fund, said on Wednesday JAL will continue to make payments to its fuel suppliers and meet other business debts under the restructuring plan.

Tokyo Shoko Research said intra-group transactions account for 76 percent of the business at JAL’s 91 group firms. The strong group ties could have led to higher costs, it said.

Editing by David Dolan

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