A government-appointed task force crafting a revival plan for Japan Airlines cut its debt relief request to 250 billion yen ($2.8 billion) from 300 billion, but creditors still rejected the plan, two sources said.

The latest plan was rejected because creditors feel the 250 billion yen in debt waivers and debt-for-equity swaps still asks them to carry too large a burden, said the sources, who spoke on condition of anonymity because the discussions are not public.

Creditors, which include the country's top three lenders and state-owned Development Bank of Japan, are also wary of extending fresh aid without a clear explanation of how and to what extent the state is willing to inject public funds.

The task force, which is composed of turnaround specialists and which reports to transport minister Seiji Maehara, did not give details on public funds or what scheme would be employed for the debt restructuring, the sources said.

JAL, Asia's largest airline by revenue, is headed for its second straight annual loss, weighed down by some $15 billion in debt and a bloated cost base that makes it less efficient than domestic rival All Nippon Airways Co.

The task force's latest plan assumes JAL's operating loss will balloon to 200 billion yen in the business year to March 2010 from its current forecast for a loss of 59 billion yen, the two sources said.

The 250 billion yen in debt relief is based on the estimate that JAL will be able to improve to an annual operating profit of 50 billion yen in five years, the sources said.

JAL has been restructuring under state supervision since it received a 100 billion yen government-guaranteed loan in June.

(Editing by David Holmes)

Japan Airlines