JAL Takes Unprecedented Path

Japan Airlines (JAL) said Friday it will raise up to $1.9 billion to buy new aircraft by issuing new shares of stock equivalent to 38 percent of its outstanding stock. That will trigger a huge dilution in share value for existing stockholders. Financial analysts called the move "unprecedented." One analyst said he never had heard of such a drastic step by a major company, while another said the airline took the step because it couldn't afford the interest necessary to borrow funds to finance any purchases. JAL will issue 700 million new shares to garner the maximum funds available to purchase new planes and parts, and didn't rule out issuing more if needed. Analysts say JAL's fleet is older than that of competitor All Nippon Airways and JAL plans to purchase 86 planes over the next five years, as it tries to cut fuel and maintenance costs. In recent years, JAL's finances have slid deeply into the red as the airline has been buffeted by management infighting, high fuel costs and falling passenger numbers.

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