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JAL Needs Government Backing to Survive: Analyst

Japan Airlines will have a higher chance of survival if the Japanese government throws its weight behind its restructuring plan, said Siva Govindasamy, Asia managing editor at Flightglobal.

"I think most importantly, it (JAL) needs to get Japanese government support. Without Japanese government support, this will not work," Govindasamy said on CNBC's Capital Connection.

Although recent media reports have suggested that the government plans to pump in about 300 billion yen ($3.3 billion) in fresh capital into the loss-stricken carrier, it is on condition that it files for bankruptcy and its banks agree to waive about 350 billion yen in debt.

The news sent JAL's stock plunging from over 180 yen a year ago, to just 7 yen on Wednesday.

The carrier, weighed down by $16 billion in debt and mired in losses, currently operates many routes that it inherited through its acquisition of other smaller carriers over the last few years, he said.

"Japan Airlines (JAL) has an extensive network, not just within Japan - which is a very lucrative market - but beyond Japan to the rest of Asia and to the U.S. as well. What's held JAL back for many years is also that," Govindasamy added.

"So what this means is that JAL has to restructure ... It needs to trim its network, there are too many unprofitable routes there. It needs to get newer aircraft that are more profitable," he said.

"If it restructures, there is a very good business there, which is why American and Delta are so keen to get on board with JAL ... It needs to make all these decisions. But to make all these decisions, it needs money, it needs the operating cash and that's where the Japanese government is likely to come in."