By ELAINE KURTENBACH, Associated Press
TOKYO (AP) — Japan Airlines Co. capped an $8.5 billion initial public offering, the biggest this year after Facebook's, with a modest return to the Tokyo Stock Exchange: Its share price rose only 1 percent in the first day of trading.
The shares closed at 3,830 yen ($48.69), barely above their 3,790 yen IPO price, after briefly topping 3,900 yen shortly after trading opened.
The carrier, also known as JAL, was delisted after it went bankrupt in 2010 but has since carried out cost cuts and restructured to return to solid profitability. Its 663 billion yen ($8.5 billion) IPO nearly doubled the 350 billion yen that went into its government-backed bailout.
"The relisting of our stock is only the starting line for our departure," the company's president Yoshiharu Ueki told reporters, vowing to return the support the airline had received by ensuring good service, safety and enhancing the company's value for its investors.
Though the IPO was oversubscribed and pre-debut gray market trading levels reportedly exceeded 4,000 yen ($50) a share, investor enthusiasm may have been tempered by previous losses and concern that JAL's recovery may not be sustainable given fierce competition from regional carriers.
"We have to see how its recovery is progressing," Yuichiro Hata, the transport minister, said of JAL's trading debut. "Ensuring safety and reliability is the top priority, and we will provide guidance as needed."
JAL's 2.32 trillion yen ($29.4 billion) default was the biggest ever by a Japanese non-financial institution. The 175 million shares included in the IPO were only those held by the Enterprise Turnaround Initiative Corporation of Japan, which is the government-backed entity put in charge of the airline's bailout and restructuring.
Its shares in the carrier accounted for 96.5 percent, with the remaining 3.5 percent still held by existing shareholders.
Once Japan's flagship carrier and a national icon known for courteous service and punctuality, JAL symbolized the country's economic rise and then its stagnation as it struggled with a bloated workforce, unpopular routes and safety lapses.
Kazuo Inamori, one of Japan's most celebrated entrepreneurs as founder of both ceramics maker Kyocera Corp. and mobile carrier KDDI Corp., oversaw the airline's restructuring after it applied for bankruptcy after racking up mountains of debt..
Since its default, JAL has trimmed a third of its payroll, investing in low-cost carriers, retiring its big jets in favor of smaller ones suitable for regional hauls and changing its routes to emphasize international routes rather than sluggish domestic ones.
"The challenge now is ensure a fair and equal opportunity for all Japanese carriers to be successful," Tony Tyler, director general and CEO of the International Air Transport Association, said Wednesday in comments to the American Chamber of Commerce.
The IATA has been lobbying for Japan to lower high costs for airlines at the country's airports.
JAL's comeback has drawn criticism that the government-backed bailout might have been unfair to its rival carrier in Japan, All Nippon Airways, which made gains when JAL was struggling.
Japan Airlines posted a profit 187 billion yen ($2.4 billion) profit for the fiscal year ended March 2012, while All Nippon Airways recorded a 28 billion yen ($356 million) profit for the fiscal year through March 2012.
The industry remains highly competitive, and Japanese increasingly are no longer so loyal as they used to be to national carriers. Meanwhile, budget airlines and Chinese carriers with significantly lower cost bases are challenging JAL and ANA on both domestic and international routes the CAPA - Center for Aviation, said in a recent report.
It praised JAL's decision to shift its focus to overseas markets.
"Its plan is a solid start, and remarkable when considering the inefficiencies in the carrier at the start of the decade," it said.
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