Hiroshige Nishizawa (2nd R), President of Enterprise Turnaround Initiative Corporation of Japan, speaks next to Haruka Nishimatsu (R), President and CEO of JAL, during a press conference at Tokyo Chamber of Commerce and Industry Building on January 19, 2010 in Tokyo, Japan. [CFP]

Japan's top carrier, Japan Airlines Corporation (JAL), formally filed for bankruptcy protection on Tuesday, paving the way for state-led restructuring.

JAL filed for bankruptcy protection with the Tokyo District Court, with its liabilities, including those of group firms totaling 2.32 trillion yen (US$25.8 billion), the largest ever loss by a Japanese nonfinancial business.

The Tokyo Stock Exchange said JAL shares will be delisted from its First Section from Feb. 20, through 100 percent equity reduction. Shares in the carrier dropped to a record low of 3 yen at one point during trade on Tuesday.

The Japanese government said in a statement it will seek "the understanding and cooperation of foreign governments" to enable JAL to continue its flight operations and implement its rehabilitation program.

Asia's largest carrier in terms of revenue will continue its operations under the sponsored support of the state-backed Enterprise Turnaround Initiative Corporation of Japan (ETIC), who will seek through wholesale restructuring procedures, to free itself from the burdening constraints of its crippling debt.

The rehabilitation plan will involve the ETIC injecting 300 billion yen (US$3.3 billion) of fresh funds into the struggling carrier and creditor banks and other financial institutions have been asked to waive about 350 billion yen in liabilities to help eat away at JAL's debt.

Additionally the Japanese government is preparing at least 900 billion yen in new equity and credit lines to keep the airline operating while in bankruptcy.