November 6, 2009
Five years after retiring from Japan Airlines Corp (9205.T), former pilot Tsutomu Watanabe is fighting to protect the pension he was promised but that the airline can no longer afford to pay.
JAL’s pension shortfall, which it estimated at 330 billion yen ($3.6 billion) in March, is threatening to push Asia’s largest airline into bankruptcy unless its 9,000 retirees are forced to have their payouts cut, lawyers and analysts said.
“My pension contract is settled and I have my certificate,” said the 65-year old Watanabe, who logged more than 18,000 hours in international flights during his career.
“People are calling for JAL pensioners to accept a cut in payouts, but is it wrong for me to say I don’t want my pension to be reduced? I have a right to receive it.”
JAL said last week it would apply for aid from a state-backed turnaround fund. It could receive a large injection of public money from the fund if it can secure the backing of creditors and come up with a viable restructuring plan.
That plan hinges on addressing its pension problem, for which there is no obvious solution.
JAL President Haruka Nishimatsu made a plea to the company’s pension fund in May for payments to be reduced by more than half, and the airline has already factored a 88 billion yen gain from the move into its profit forecasts for this financial year.
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A government-led task force that had been working on a JAL revival plan estimated the shortfall could be cut to 100 billion yen if the annual interest rate on pension reserves was cut to 1.5 percent from 4.5 percent, sources have told Reuters.
These proposals have triggered strong opposition from retirees and employees, who under current laws can easily block any cuts to their benefits if just one third of them vote against.
To get around this, the government is considering legislation that would allow JAL to forcibly cut payouts, but implementation would be tricky as it could be interpreted as violating a constitutional protection of personal property rights.
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