The Japanese government plans to put a state-backed turnaround body in charge of the overhaul of Japan Airlines <9205.T>, the Nikkei business daily said, underlining the government's deeper involvement in the process.

Liabilities at JAL would exceed its assets by as much as $8.8 billion if it were liquidated, a source close to the matter has said, indicating the depth of the problem facing the airline as it seeks aid from banks and the state to avoid bankruptcy.

Separately, JAL, Asia's largest airline by sales, has decided to boost planned job cuts by 44 percent to 13,000 jobs, and cut the number of its subsidiaries by more than half as part of its restructuring steps, Kyodo news agency said.

The state-backed organization, the Enterprise Turnaround Initiative Corporation of Japan (ETIC), invests in and buys debt of companies with strained balance sheets and dispatches turnaround specialists to assist them in restructuring.

JAL is set to slash its debt under the government's guidance and come up with a drastic restructuring scheme, the Nikkei said on Sunday. The decision to put JAL under ETIC's supervision will be announced as early as this week, the paper said.

The ETIC, established earlier this month, operates like an investment fund and initially has the ability to procure up to 1.6 trillion yen ($17 billion) in state-guaranteed funding in the current fiscal year to March 2010.

No officials at the ETIC were immediately available for comment.

A task force that reports to Transport Minister Seiji Maehara has been seeking a bridge loan of about 180 billion yen for JAL and a total capital boost of 300 billion yen from both the government and the private sector, the source said.

The government, working with the ETIC, will look into a new and more in-depth turnaround scheme for the airline, while paying heed to the task force's existing plans, the Nikkei said.

JAL is headed for its fourth annual loss in five years, weighed down by roughly $15 billion in debt and a bloated cost base that makes it less efficient than domestic rival All Nippon Airways Co <9202.T>.

The troubled airline now plans to cut 13,000 jobs by March 2015, 4,000 more than it originally planned, pushing down its total workforce to around 35,000, Kyodo said late on Saturday.

JAL needs to show willingness to carry out painful restructuring to win support from banks and the state for further loans and capital injections.

The airline also plans to lower the number of its subsidiaries to about 50 from roughly 120, the news agency said. JAL officials were not immediately available for comment.

($1 = 92.04 Yen)

(Reporting by Kiyoshi Takenaka; Editing by Sugita Katyal)

Japan Airlines Investment