JAL to stay with American Airlines

February 8, 2010
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, TOKYO, Feb 8 – Japan Airlines, after declaring bankruptcy last month, has decided to keep its current tie-up with American Airlines and end talks to defect to Delta Air Lines, local media reported on Monday.

US giants American Airlines and Delta Air Lines have been competing to take a stake in ailing JAL despite its bankruptcy filing with 26 billion dollars of debt — one of Japan\’s biggest ever corporate failures.

Japanese media had previously said JAL planned to switch to Delta, the world\’s biggest airline, and its SkyTeam airline alliance from American Airlines\’ Oneworld alliance as part of its recovery plan.

But JAL\’s new management and the government-run Enterprise Turnaround Initiative of Japan, which supervises the airline\’s restructuring, believe the switch would be costly and risky for JAL, the Asahi and other dailies said.

The embattled carrier feared that a switch to Atlanta-based Delta and SkyTeam would confuse its passengers and may not win antitrust immunity from US authorities because it would dominate the trans-Pacific market.

A JAL spokesman would not confirm the media reports, saying: "Nothing is decided on this issue and the reports are based on speculation."

American Airlines in a statement said that "until JAL officially announces its future alliance plans, it\’s inappropriate to comment."

"American Airlines and Oneworld continue to believe that a relationship with Oneworld is the best outcome for JAL, for Japan\’s national interests and for consumers travelling between Japan and the United States," it said.

The two US carriers have been circling embattled JAL for months, offering it large cash injections for a stake in the airline and cooperation on its lucrative Asian and wider international route networks.

American, the second largest US carrier, and Oneworld together with a private equity firm last month raised their offer to 1.4 billion from 1.1 billion dollars in capital against Delta\’s one billion dollars.

Thomas Horton, American\’s vice president, at the time promised to help bring "stability and certainty to Japan Airlines at a time when it is most needed, as it faces turbulent times over the coming weeks and months."

Fort Worth-based American said that by sticking with Oneworld, JAL stood to gain two billion dollars over the next three years from its links with alliance members, which also include British Airways, Qantas and Cathay Pacific.

JAL is hobbled by heavy costs stretching back to its days as a state-owned flag carrier, as well as a route network that includes flights to small domestic airports that are often unprofitable to service.

The airline appointed business guru Kazuo Inamori as its new chairman and has announced radical restructuring, including slashing more than 15,600 jobs, axing unprofitable routes and selling off some non-core assets.

JAL plans to tell Delta as early as this week that it will terminate the tie-up talks and then apply with American for anti-trust immunity with the US Department of Transportation this month, the Nikkei business daily said.

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