American Airlines may buy equity in JAL

American Airlines, the world’s second-largest carrier, may buy equity in Japan Airlines Corp. to prop up an ally that forecasts its fourth loss in five years, people familiar with the plan said.

American also plans to expand code-sharing with Japan Air, its partner in the Oneworld marketing alliance, said the people, who asked not to be identified because the discussions aren’t public. Japan Air is talking with other carriers to strengthen its business, spokeswoman Sze Hunn Yap in Tokyo said, declining to comment on specific discussions or possible investments.

Japan Air, which has received three government bailouts since 2001, the most recent in June, is also in talks on possible stake sales to Delta Air Lines Inc. and Air France-KLM, people familiar with those negotiations have said. The carrier, known as JAL, may be seeking 250 billion yen ($2.8 billion) to rebuild operations, the Nikkei newspaper reported earlier today without saying where it got the information.

“I don’t think the Japanese government cares who gives JAL the money,” said Yasuhiro Matsumoto, an analyst in Tokyo at Shinsei Securities Co. “JAL would probably rather get money from American since they’re in the same group,”

American declined to comment on reports of an investment in Japan Airlines, according to Charley Wilson, a spokesman at the airline’s Ft. Worth, Texas, offices.

Alliance Benefits

Code-sharing with the Asian carrier would give American or Delta access to more cities in Japan and the ability to sell seats on Japan Air flights directly to customers. Alliances such as Oneworld and SkyTeam, which includes Delta and Air France- KLM, let airlines expand their networks by pulling in more passengers and sharing revenue at lower costs.

American, a unit of AMR Corp., has been talking with Japan Air for more than a month on a “far-reaching” joint venture, the Wall Street Journal reported earlier.

Japan Air posted a 99 billion yen loss in the first quarter, the most in at least six years, as business and leisure travel plummeted during the country’s worst postwar recession.

The airline, which predicts a loss of 63 billion yen for the full year ending March, received a 100 billion yen loan from the state-owned Development Bank of Japan and other local lenders in June. The government set up a panel of legal and academic experts last month to help restructure JAL.

“Japanese banks may be convinced to give JAL more money if it receives capital from another airline,” Shinsei’s Matsumoto said. “If an airline is willing to put substantial funds into JAL that means it’s more likely to survive.”