TOKYO (Reuters) –
Bankruptcy has been proposed by a state-backed fund as an option in the restructuring of Japan Airlines Corp, two sources familiar with the matter said.

The state-backed Enterprise Turnaround Initiative Corp of Japan (ETIC) has been holding talks with creditor banks on how to revive JAL, and is expected to make a final decision on whether to support the struggling carrier next month.

In those talks the ETIC has discussed using a Chapter 11-style bankruptcy procedure as part of a potential revival plan, but has not yet ruled out an out-of-court restructuring in coordination with main creditors, the two sources said.

The sources spoke on condition of anonymity given the sensitivity of the matter.

No one at ETIC or JAL was immediately available for comment.

Shares of JAL were unchanged at 97 yen. The benchmark Nikkei average was up 0.7 percent.

JAL's stock has lost more than half its value this year amid growing worries that it could face bankruptcy.

Its main creditors, which include the state-owned Development Bank of Japan and the country's top three lenders, remain keen to keep the carrier out of bankruptcy court, banking sources have said.

JAL, weighed down by $15 billion in debt and struggling to cut a 331 billion yen ($3.6 billion) pension shortfall, applied for a bailout from the ETIC in October.

At the same time JAL is being courted by American Airlines and Delta Air Lines. The U.S. carriers have made rival offers of financial aid, eyeing a greater foothold in Japan and access to JAL's network to the rest of Asia.

JAL says it will make a decision on which overseas partner it will choose by early January.

(Reporting by Nathan Layne and Nobuhiro Kubo; Editing by Michael Watson)