Bankrupt Japan Airlines keeps flying

Nearly 16,000 jobs will be lost through the restructuring of the flagship airline, which will be slimmed down and its presence around the world diminished.

The carrier will reduce pensions for retired staff, cut routes and shift to more fuel-efficient aircraft during the restructuring.

Japan's government will pay to keep the group's planes in the air during the restructuring, while the Oneworld Alliance of airlines – which includes British Airways – said JAL's position within the group would be unaffected by the bankruptcy protection.

Lenders will forgive nearly 5bn in debt, while JAL shares will be removed from the Tokyo Stock Exchange on 20 February, wiping out investors.

There was no word on the outcome of a fierce tug-of-war between Delta Air Lines and American Airlines for a slice of JAL's business. Despite its woes, the airline's access to Asia is a mouthwatering prize for foreign airlines.

A state-backed turnaround agency pledged 900bn in financial support for JAL – 600bn in credit lines and a 300bn cash infusion. The bankruptcy is the fourth-largest in Japan, according to figures from Teikoku Databank, which tracks corporate failures.

Seiji Maehara, Japan's transport minister, said: "This is not the end of JAL. Today is the beginning of a process to keep JAL alive."

Haruka Nishimatsu, JAL's president, yesterday resigned, bowing deeply as he apologised for the company's troubles.

Kazuo Inamori – a Buddhist monk and founder of electronics group Kyocera and KDDI, Japan's second-largest mobile phone network – has been tapped as the airline's next leader.

Nishimatsu said: "This is our last chance. I believe we can be reborn as an airline that can represent Japan again."

JAL said frequent fliers would not lose their miles. The Japanese authorities asked foreign governments for co-operation to keep JAL flying around the world.

The day's events conclude a process that began in October when JAL first turned to the Japanese government's Enterprise Turnaround Initiative for help.

Maehara said the turnaround would involve 15,661 job cuts – a third of JAL's payroll – by 2013.

The carrier will scrap all 37 of its Boeing 747 jumbo jets and 16 MD-90s, which will be replaced by 50 smaller aircraft.

JAL shares, which have lost more than 90 per cent of their value over the past week, tumbled by a further 40 per cent yesterday to 3 before finishing flat at 5. The company is now essentially worthless, with a market capitalisation of about 13.7bn – the price of one Boeing 787 jet.