Japan Airlines Corp plans to ask creditors for 250 billion yen ($2.8 billion) worth of debt forgiveness and debt-for-equity swaps and will also seek 150 billion yen in capital, a source familiar with the matter said.

The struggling airline, Asia's largest by revenue, has been scrambling to put together a new turnaround plan under the supervision of the government, which is overseeing its restructuring after backing a 100 billion yen loan.

JAL had proposed a plan in September under which it pledged to cut 6,800 jobs, eliminate 50 routes and lower operating costs by 30 percent, but it was forced back to the drawing board after the government said the steps were not enough. It was widely expected to seek aid from its banks and the government to pay for the restructuring given the wobbly state of its capital structure, which is light on equity and weighed down by $15 billion in debt.

This would allow JAL to reduce its debt burden and secure funds necessary for restructuring, said Ryota Himeno, a transport analyst at Mitsubishi UFJ Securities.

The amount may be enough given that JAL has said it would need 250 billion yen by the end of the financial year.

The new plan, crafted with the help of a task force set up by the newly elected Democratic Party, includes asking its creditors to forgive debt and swap some of its debt for equity. In total this would amount to 250 billion yen in aid, the source said.

The source, speaking on condition of anonymity because the plan is not yet public, also said JAL would seek to boost its capital by 150 billion yen, some of which it hopes will come from an injection of public funds.

The source was confirming a previous report by Kyodo news.

A JAL spokesman declined to comment.

Kyodo also said JAL is considering expanding its planned job cuts to more than 9,000, or one-fifth of its workforce, and that its president Haruka Nishimatsu will step down and be replaced by someone from outside the company.

SHARES DOWN

Shares of JAL closed down 2.9 percent at 133 yen. The benchmark Nikkei average .N225 rose 0.6 percent.

JAL has put on hold talks it was holding separately with Delta Air Lines and AMR Corp's American Airlines for a capital infusion and business ties, aiming to focus first on its own revival plan, Kyodo reported last week.

The restructuring of JAL took a new turn in late August when the Democratic Party came to power in a landslide election victory, ending the rule of the Liberal Democratic Party, which had supported state help for the airline.

The Democrats have said they do not want to see JAL fail but have not been clear on the extent to which they would be willing to use state finances to that end.

Aid from the government has been seen as a vital component of JAL's restructuring, either in the form of loan guarantees or a capital injection. Otherwise, JAL's creditors would be reluctant to extend fresh loans, bankers have said.

JAL's largest creditor is the state-owned Development Bank of Japan with 230 billion yen in loans outstanding as of March 31.

Other lenders include Mizuho Corporate Bank with 57 billion yen in loans, Bank of Tokyo-Mitsubishi UFJ with 53 billion yen and Sumitomo Mitsui Banking Corporation with 37 billion yen.

The new transport minister Seiji Maehara has set up a special task force to help put together the new turnaround plan.

I met with the task force members this morning and I got the impression they can come up with a fundamental solution, Maehara said.

(Reporting by Nobuhiro Kubo; Editing by Hugh Lawson and Joseph Radford)

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