TOKYO (Dow Jones)--Japan's finance minister Hirohisa Fujii said Sunday that convincing and satisfactory explanation to the people is necessary when considering the use of public funds to bail out struggling carrier Japan Airlines Corp.

In his appearance on a TV program Sunday, Fujii said the government "must follow the dictates of public common sense and the transport minister Seiji Maehara also understands this point."

His comments came at the time the government is putting together a turnaround plan for the ailing airline. Fujii said Friday that Maehara has yet to inform him on how the government should help JAL, or whether it will use public funds to help rescue the carrier.

The airline, Japan's biggest airline by revenue, is coming under increased scrutiny, as observers say much remains to be done. For the fiscal year ending March, JAL, formerly state-owned but privatized in 1987, is predicting a massive net loss of Y63 billion, as it struggled under surging jet fuel prices and slumping travel demand.

Observers also cite tardiness in JAL's shifting from a high cost structure. In addition to withdrawing from unprofitable routes and payroll cutbacks, a drastic reduction in pension-related liabilities, partly in the form of payment to retired workers, is inevitable. That is a necessary step which JAL creditor banks are strongly asking for and is a reminder that correcting the high cost structure was the beginning of General Motor Corp.'s revival.

Fujii didn't specifically mentioned what steps are necessary. But his comments suggest that the government is well aware of criticism about JAL's pension structure, which is squeezing JAL's financial standing and is considered as a major hurdle for JAL's revival plan.

A task force appointed by the transport minister is seeking a Y300 billion capital increase with public and private-sector money. In addition, the task force has asked JAL's main creditor banks to waive loans and consider debt-for-equity swaps totaling Y250 billion.

The task force's various restructuring proposals have involved the public purse despite Japan's already bulging budget deficit. JAL's lenders are balking at the financial aid, because such an assistance eventually may be used to maintain high level of JAL's corporate pension benefits.

Separately, the Nikkei reported in its Sunday morning edition that Japan's government has decided to use the state-backed turnaround body to help restructure JAL, in a move that underscores the government's commitment to JAL's revival.

Without quoting sources, the paper said the Enterprise Turnaround Initiative Corp. of Japan (ETIC) will lead JAL's turnaround, aimed at cutting back JAL's excess debt. The government will also put together a new, drastic restructuring plan including public fund injection and a substantial reduction in pension-related liabilities, the Nikkei said. The government cabinet ministers will likely discuss and confirm the policy as early as later this week, the paper said.

Government officials were not immediately available for comments.

The turnaround body will also provide bridge loans to JAL to eliminate credit concerns about JAL among other steps, the paper said.

ETIC, which is jointly funded by the government and private-sector financial institutions, has kicked off operations earlier this month to provide support to companies with excess debt but potential for future revival. The turnaround body, which will have a life of five years, is capable of raising up to Y1.6 trillion in government guaranteed funding.

Kyodo News reported Saturday that JAL has decided to reduce its group workforce by 13,000 by the end of March 2015, 4,000 more than its initial plan. A JAL spokesman declined to comment on the report, adding that the report is not based on what the airline has announced.

Meantime, JAL remains in contact with Delta Air Lines Inc. (DAL) and AMR Corp.'s (AMR) American Airlines over a possible alliance that could see one of the two U.S. carriers taking a small stake in Tokyo-based JAL.

Though it already raised Y100 billion last June to cover daily operating costs, analysts estimate JAL may need up to Y150 billion in new funds in the second half of the fiscal year through March 2010 just to keep its jets in the air, even without considering ways to tackle its debt pile.