Japan's struggling carrier, Japan Airlines Corp., on Monday urged retirees and employees to accept an average 40% reduction in their pension payout, a move crucial to the airline's survival, and failure of which will result in JAL filing for bankruptcy.

In May this year, JAL President Haruka Nishimatsu had sent out a plea to the carrier's pension fund to cut payments by over 50%, with the aim to balance pension shortfalls of an estimated 330 Billion Yen ($3.7 Billion) which were recorded for March.

The cut, however, has been strongly opposed by pensioners, and the proposal can be easily rejected under the current laws which require an approval of at least two-thirds of pensioners to take the plan ahead. JAL has asserted that coming up with a solution for the pension shortfall is essential, and a prerequisite to qualifying for a Government backed bail out for the airline.

"If we can't, the risks to our survival will increase, including the possibility of a court-led reorganization", President Nishimatsu shared. JAL is looking to reach a formal agreement on the proposal by the end of January next year.