A state-backed turnaround fund is likely to decline financial aid for Japan Airlines <9205.T> from Delta Air Lines or American Airlines and limit an alliance to a business tie-up, a newspaper reported on Sunday.

The Enterprise Turnaround Initiative Corp of Japan (ETIC) has likely determined that such capital investment would complicate restructuring procedures and narrow its future exit strategies, the Nikkei business daily said, without citing sources.

ETIC could not be immediately reached for comment.

Delta Air Lines and American Airlines have been courting JAL with rival offers of financial aid of $1 billion or more, eyeing a stronger foothold in Japan and close ties on overseas routes.

The move would also allow JAL to accelerate its restructuring measures, the report added.

The Nikkei also said the ETIC and the government had asked Kyocera Corp's <6971.T> honorary chairman, Kazuo Inamori, 77, to become JAL's chief executive officer. Inamori was likely to reply by the end of this week, the report added.

The fund has been looking at recruiting an outsider as JAL's next CEO. Current CEO Haruka Nishimatsu has indicated he would resign once the course of JAL's restructuring plan is in place.

The main lenders to Japan Airlines plan to accept a restructuring package that would require the carrier to file for bankruptcy, sources said on Saturday, increasing the likelihood of a state bailout this month.

ETIC plans to establish a credit line of more than 600 billion yen ($6.48 billion) along with a state-owned bank to ensure JAL can keep flying once a bankruptcy is announced, a source with the knowledge of the matter said.

(Reporting by Osamu Tsukimori; Editing by Nick Macfie)

Japan Japan Airlines American Airlines