JAL fuel hedges mainly Brent forwards -source

TOKYO, Jan 19 (Reuters) - The bulk of Japan Airlines' fuel hedges involve Brent forward contracts, and about 40 billion yen ($441 million) is estimated to be exposed in the event of an automatic termination of hedging contracts, a source familiar with the matter said on Tuesday.

The source told Reuters there were 12 major counterparties, of which 10 have contracts that are subject to ISDA standards, meaning automatic early termination (AET) will be triggered.

Normally, filing for bankruptcy protection triggers an event of default, which in turn triggers AET.

Under bankruptcy procedures, counterparties could lose as much as 80 percent of their hedge exposures, the source said.

The source said it remained unclear how JAL would hedge in the future.

JAL spokeswoman Sze Hunn Yap said: 'We intend to continue fuel hedging as per the current policy.'

But Japan Airlines Corp is close to losing control of its company as the carrier is expected to file for one of the country's largest-ever bankruptcies on Tuesday, marking the failure of the former state-owned carrier that once symbolised Japan Inc's international aspirations.

(Reporting by Nathan Layne and Chikako Mogi; Editing by David Dolan and Ramthan Hussain)

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