TOKYO, Oct 26: Japan’s government and ruling parties have worked out a rescue package for airlines and travel agencies, both hard-hit by a sharp drop in tourism following the September 11, terror attacks, a report said on Friday.

The government-affiliated Development Bank of Japan will extend low-interest loans to airlines to help them repay loans taken from private banks for aircraft purchases, the Nihon Keizai Shimbun reported.

The government will also set up a new loan program at the Japan Bank for International Cooperation to provide funds to be used as deposits for the purchase of new airplanes, it said.

To lighten the tax burden on airline operators, the government and ruling parties will discuss extending a special tax break program for aircraft depreciation costs, which is slated to expire the year to March, it said.

For travel agencies, prefectural credit guarantee associations will also extend credit guarantees of up to 400 million yen (3.3 million dollars), double the current 200 million yen, the business daily said.

The credit guarantees would make it easier for the agencies to take out loans from private financial institutions, it said.

The cancelled bookings were worth 120 billion yen, resulting in an estimated lost profit of around 14.4 billion yen to the 11 operators.

About a half the planned US-bound trips were cancelled in September, and the impact spilled over to other destinations such as Europe and the rest of Asia, association spokeswoman Toshiko Kato said.

She said some of the demand for overseas trips is shifting to domestic tours, adding overseas trips fell 7.7 per cent in value in 1991 when the Persian Gulf war broke out against a 7.1 per cent rise in domestic tours.

Extravagant spending by Japanese travellers is an important source of income for local economies in many areas.

The total overseas travel expenditure per trip per person was 309,000 yen in 2000, of which 75,000 yen was spent on shopping, according to JTB.

Asia’s biggest carrier Japan Airlines Co. Ltd. (JAL) earlier this month slashed its net profit forecast to March and warned of job cuts, blaming a plunge in demand for air travel.

JAL said Friday it would suspend flights between Japan and some US destinations while increasing Asia-bound services for its winter schedule from October to March 2002.—AFP