TOKYO, Sept. 18 (Reuters) – Japan's new transport minister said Japan Airlines Corp. must not be allowed to fail, indicating the state would support the loss-making carrier as it seeks fresh funding for a drastic cost-cutting plan.

The comments by Seiji Maehara on Thursday come as Delta Airlines and AMR Corp.'s American Airlines hold rival talks to invest in Japan Airlines (JAL) as they eye growth opportunities across Asia.

''JAL must not be allowed to fail,'' Maehara told a news conference. ''I hope JAL will restructure and come up with a solid turnaround plan so that banks can lend it money and it can stage a recovery on its own.''

Maehara's Democratic Party was swept to power in a landslide victory last month, ending five decades of nearly unbroken rule by the Liberal Democratic Party (LDP).

JAL lost about $1 billion last quarter and has been scrambling to put together a revival plan this month to submit to the transport ministry, which is supervising its restructuring after the state backed a 100 billion yen ($1.1 billion) loan.

Maehara said he would disband an expert panel formed under the LDP government to review that plan. He said he had not decided whether to create a new panel.

''I know time is limited. I will listen to various stakeholders and experts. I also need to ask JAL about the content of its restructuring measures and the feasibility of its plans.''

JAL is seeking an additional 250 billion yen in funds through a mixture of debt and equity, some of which could come from Delta or American. But banks have remained wary of lending more to JAL until the Democrats' stance is clear, banking sources have said.

The Democrats have vowed to place greater scrutiny on the use of public money, but at the same time have taken labour-friendly policies that could be at odds with plans for tough restructuring, such as scrapping unprofitable routes in Japan.

''The DPJ's policy stance is to pay greater heed to local needs, and it would be negative if it slows down the restructuring of JAL's domestic routes,'' said Naoki Fujiwara, fund manager at Shinkin Asset Management.

Shares of JAL, Asia's largest airline by revenue, closed flat at 167 yen. The Nikkei average rose 1.7 percent.

JAL has been hard hit by the global recession, which has cut passenger numbers and cargo traffic.