JAL ‘to stay with American Airlines’

Japan Airlines, after declaring bankruptcy last month, appeared set on Monday to keep its current tie-up with American Airlines and end talks to defect to the world’s biggest carrier Delta.

US giants American and Delta Air Lines have been competing to invest in ailing JAL, which filed for bankruptcy with $26 billion of debt in one of Japan’s biggest ever corporate failures.

Both airlines have circled JAL, hoping to benefit from a new US-Japan “open skies” deal to expand their reach in the lucrative Asia-Pacific aviation market. The market last year surpassed North America as the world’s largest.

Japanese media had previously said JAL planned to switch to the SkyTeam alliance of Delta and ditch American’s Oneworld alliance, which also includes British Airways and Qantas.

But newspapers including the Nikkei business daily, and NHK television, said JAL’s new management and the government’s Enterprise Turnaround Initiative of Japan believe the switch would be costly and risky.

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

A JAL spokesman said: “Nothing is decided on this issue and the reports are based on speculation.”

In a statement, American Airlines 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.

In December, Japan and the United States reached a liberalisation deal to replace a 1952 accord that fixed the number of US-Japan flights.

The new agreement will allow carriers to adapt their schedules to passenger demand, make code-sharing easier and will give US airlines greater access to Tokyo’s Narita and Haneda airports.

American, Oneworld partners and a private equity firm last month raised their capital investment offer to JAL to $1.4 from $1.1 billion, against Delta’s $1 billion.

American said that by sticking with Oneworld, JAL stood to gain an additional two billion dollars over three years from its links with alliance members.

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 and unprofitable domestic airports.

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

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

But a Delta spokesman told AFP that the airline has no plans to drop its tie-up talks with JAL, and stressed that it was ready to cover all costs associated with JAL’s transfer from the Oneworld alliance.

“We still believe that cooperation with Delta and our Skyteam will provide Japan Airlines with an opportunity to raise revenue in the short term and long term,” said the spokesman, who declined to be named.