Japan Airlines Corp will ask the government as early as Tuesday for 100 billion yen ($1.13 billion) in bridge loans from the Development Bank of Japan, the Nikkei business daily said.

JAL is also expected to cancel year-end bonuses at its roughly 100 subsidiaries, starting next week, the paper said.

The beleaguered airline operator, which is applying for business rehabilitation assistance from the government-backed Enterprise Turnaround Initiative Corp. of Japan, needs to secure bridge loans to keep operating and avoid a cash crunch, the daily said.

To buy additional time, JAL has entered into an out-of-court arbitration process so that it can stop making debt payments to creditors, the daily added.

Earlier in the day, JAL denied a report in the Yomiuri newspaper, which said it may have to settle 100 billion yen on hedging contracts against fluctuations in fuel prices, currencies and interest rates because it has requested a freezing of payments to creditors. [ID:nT294279]

On Friday, the carrier held its first creditors' meeting and reached an agreement that the Development Bank of Japan's loans would be given repayment priority. With conditions for DBJ loans now in place, JAL will ask the transport ministry for access to the bridge loans, Nikkei said.

Transport Minister Seiji Maehara will hold discussions Tuesday with other cabinet members to argue that JAL's services will be interrupted without the bridge loans, the business paper said.

The nation's three major banking groups will also offer about 25 billion yen in loans to JAL to buy aircraft equipment.

These loans will be guaranteed by the Japan Bank for International Cooperation, the Nikkei said.

The airline has already decided not to pay winter bonuses to employees at the parent, the paper said in a separate report.

Most of the units are expected to oblige to JAL's request to cancel the bonuses, the Nikkei said.

($1=88.86 Yen)

(Reporting by Shailesh Kuber in Bangalore; Editing by Anthony Kurian)

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