Asia’s largest airline is threatened to file bankruptcy unless 9,000 former employees are forced to have their payouts cut. This is a result of JPY330 billion yen (USD$3.6 billion) loss that the company suffered in March.

JAL President Haruka Nishimatsu made a plea to the company’s pension fund in May for payments to be reduced by more than half, and the airline has already factored an JPY88 billion gain from the move into its profit forecasts for this financial year.

JAL said last week it would ask for aid from a state-backed turnaround fund. It could receive a large injection of public money from the fund if it can secure the backing of creditors and come up with a viable restructuring plan.

These proposals have triggered strong opposition from retirees and employees, who under current laws can easily block any cuts to their benefits if just one third of them vote against.

To get around this, the government is considering legislation that would allow JAL to cut payouts, but implementation would be tricky as it could be interpreted as violating a constitutional protection of personal property rights.

A bankruptcy would likely cause more pain for creditors, which include the state-owned Development Bank of Japan and the country’s top three private banks. The task force has estimated creditors could recover just 2-3 percent of their loans in bankruptcy, as opposed to 20-30 percent if the restructuring were out of court.

Five years after retiring from Japan Airlines, former pilot Tsutomu Watanabe is fighting to protect the pension he was promised but that the airline can no longer afford to pay.

My pension contract is settled and I have my certificate, said the 65-year old Watanabe.

A website set up by Watanabe and other JAL retirees shows that more than 40 percent of 9,000 people receiving and in line to receive benefits have signed an online petition against pension cuts, which puts them above the one-third threshold.