The talks for the merger of air cargo operations of ailing Japan Airlines Corp and Nippon Yusen KK have reached an impasse over the basic framework of the deal, the Nikkei business daily reported.

In August last year, the two companies had agreed to combine their air cargo businesses by April 2010.

The plan called for JAL to spin off cargo operations, which would then be absorbed by Nippon Yusen unit Nippon Cargo Airlines Co. Nippon Yusen was to own a 50 to 60 percent interest in the new entity, with JAL holding the rest, Nikkei reported.

After JAL filed for bankruptcy protection last week, the state-backed Enterprise Turnaround Initiative Corp (ETIC) of Japan sought to sell off the cargo business or keep JAL's stake in the merged company to a minimum, the newspaper said.

Doing so would remove the cargo operation's aircraft and roughly 3,000 employees from the balance sheet. The segment has been logging an operating loss of more than 20 billion yen a year, the Nikkei reported.

ETIC is overseeing JAL's reorganization.

The daily said Nippon Yusen opposes taking on the additional personnel, and quoted a senior executive saying that the talks may be broken off. (Reporting by Ashutosh Joshi in Bangalore; Editing by Gopakumar Warrier)

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