TOKYO: Japan Airlines (JAL) is set to file for bankruptcy on January 19, the first step in a court-led rehabilitation process for the debt-ridden Japanese carrier, news reports said today.

The decision came as its creditor banks dropped their earlier proposal for an out-of-court reorganisation of the troubled airline after ensuring public support, the Nikkei business daily and other media reported.

The state-backed Enterprise Turnaround Initiative Corp., now overseeing JAL’s restructuring, will provide 300 billion yen investment so that it can continue operations, the news reports said. The government body will also ask JAL’s creditors to waive a further 350 billion yen in loans to the airline, while speeding up its restructuring, including massive trimming of its international routes, they said. “We have made an effort to minimise troubles with JAL’s operations and will continue to do so in the future,” Prime Minister Yukio Hatoyama said late yesterday after meeting transport minister Seiji Maehara. The government will issue a statement to 35 countries, where JAL has operations, guaranteeing public support in a bid to help avoid a possible credit squeeze on the company overseas, the Yomiuri Shimbun said. Shares in Asia’s biggest airline sank 11.8 per cent to close at 67 yen yesterday. The carrier is seeking its fourth government bailout since 2001 to enable it to keep flying in the face of mounting debts.