Japanese govt helps airlines

Agence France Presse, Tokyo

The Japanese government will extend loans and guarantees to airlines and travel agencies that have suffered from a drop in demand since last month's terror blitz in the U.S., the transport minister said Tuesday.

"They have fallen into desperate management straits," minister Chikage Ogi told reporters announcing the decision made at a morning cabinet meeting.

"We think this plan will ease the financial worries of some companies, but we want to continue to monitor the situation," she said.

Two government financial agencies would provide 120 million yen (US$1 million) in loans with five year terms to travel agencies to help shore up their working capital at around 1.75 percent interest, said Kenta Sakamaki, a ministry official.

Another financial agency would double its guarantee of private loans to travel agencies, with the amount to be determined Friday, Sakamaki said.

Tokyo would also provide long-term, low-interest loans of around 1.5 percent to airlines to make up for the shortfall if private financial institutions fail to provide loans.

"If airlines are first rejected by banks, then this plan will take effect," said ministry official Koichi Wada.

He said it was unclear how much would be loaned to airlines because the amount private banks are willing to provide had not been determined yet.

Both airlines and travel agencies have been hit hard by a drop in Japanese passengers flying abroad or even to the southern Japanese island Okinawa -- home to the largest contingent of U.S. military forces in Asia, Ogi told reporters.

From Sept.11 to Oct.15, the three major Japanese airlines saw a 29.2 billion yen drop in revenue on trips abroad, the minister said.

Meanwhile, travel agencies saw 760,000 passengers cancel foreign trips, prompting a 120 billion yen drop in revenue in the period to Oct. 12, she said.

Ogi added 140,000 passengers had also canceled trips to Okinawa in the period to Oct.23.

Earlier in October, Japan's biggest carrier, Japan Airlines Co. Ltd. slashed its net profit forecast in the year to March to a 40 billion yen loss from an earlier 25 billion yen profit.

At the same time, analysts forecast a 48 percent drop in operating profit at rival All Nippon Airways Co. Ltd. to 42.5 billion yen year-on-year, down from an original estimate of 65 billion yen.

At the beginning of the month, the Japanese government decided to guarantee up to $2 billion in insurance coverage to airlines in the case of third party damage after coverage was slashed by insurers.