Tulsa World: Delta, SkyTeam make offer of $1 billion to Japan Airlines

MAKE US YOUR HOMEPAGE | Tuesday, February 09, 2010 | WIRELESS

Home > Business

Newspaper View Print this story

Comment

RSS

Bookmark

Delta, SkyTeam make offer of $1 billion to Japan Airlines

Delta Air Lines president Edward Bastian listens to reporters' questions during a press conference Wednesday in Tokyo. Delta and its SkyTeam alliance partners said they are making a billion-dollar offer intended to lure money-losing Japan Airlines from its current affiliation with American Airlines and its oneworld alliance. Junji Kurokawa / Associated Press

By TOMOKO A. HOSAKA Associated Press
Published: 11/19/2009 2:30 AM
Last Modified: 11/19/2009 10:56 AM

TOKYO — Delta Air Lines and its alliance partners said Wednesday they are making a billion dollar offer to lure loss-making Japan Airlines from its affiliation with American Airlines.

Delta is "by far the strongest partner for Japan Airlines," company president Edward Bastian told reporters in Tokyo, escalating the tug-of-war for a minority stake in Japan's flagship carrier.

The offer from Delta and the SkyTeam alliance includes a $500 million capital investment, $300 million in short-term revenue guarantees, and $200 million in asset-backed financing for the airline, known as JAL.

SkyTeam would also cover the entire cost for Japan's flagship carrier to transfer from American's oneworld alliance, estimated by Delta to total $20 million.

The stakes are high for both Delta and American, a unit of AMR Corp., as they seek to expand their international reach through global partnerships. JAL, Asia's biggest airline, is particularly attractive because of its extensive routes in Japan and China.

By partnering with JAL since the mid-1990s, American has been able to sell those routes to its own customers and share in the revenue. American and JAL offer reciprocal frequent-flier privileges to each other's passengers.

But JAL is struggling, and the Tokyo-based airline desperately needs an injection of capital and government help to avoid collapse.

It said last week it booked $1.5 billion in losses for the first half of the current fiscal year and was seeking government assistance in dealing with its creditors. Its interest-bearing debt totals nearly $10 billion.

Hit by a downturn in travel brought on by the tepid global economy and the swine flu outbreak, the company has been approved for a government-run turnaround. It is mulling large job cuts after already lowering its staff mainly through attrition as well as taking other measures such as cutting unprofitable routes.

Japan Airlines spokesman Sze Hunn Yap said the company could not comment.

Bastian said JAL's relationship with the oneworld alliance has hurt the airline, with flights between North America and Japan decreasing in recent years.

In contrast, joining SkyTeam would offer JAL access to the 3.7 million Delta customers that fly every year from the U.S. to Japan. That represents a more than threefold increase from American's passenger traffic out of the U.S. and $400 million in higher annual revenue, Bastian said.

American Airlines and Texas-based private investment firm TPG Inc. issued a statement Wednesday reiterating their commitment to JAL. American claims that JAL would suffer up to $500 million in lost revenue over two years if it defects to the SkyTeam alliance. It says it could win regulatory approval by mid-2010 for even closer ties — antitrust immunity that would let American and JAL collaborate when setting prices and schedules on U.S.-Tokyo flights.

JAL president Haruka Nishimatsu has said he wants to make a decision on any capital tie-ups by the end of the year.

The SkyTeam alliance includes Delta, Air France KLM, Aeroflot, AeroMexico, Alitalia, China Southern Airlines, Czech Airlines and Korean Air. By TOMOKO A. HOSAKA Associated Press

Newspaper View Print this story

Comment

RSS

Bookmark

Reader Comments

Show: Most Recent Comment First

Add your comment

3 comments have been made on this story so far. Tell us what you think below!

Reporting Comments

If you see a comment that violates our terms and conditions, please help us by clicking the "Report this Comment" link next to a comment. That will alert the web staff to review the comment. Thank you. -- Web Editor Jason Collington

	Report Comment Loophole, (11/19/2009 8:04:14 AM) All the airlines scream about how poor they are and then we see that they have a billion extra dollars to spend. . . Guess the surcharge for bag business is more lucrative than we thought.
	Report Comment JR, (11/19/2009 9:31:06 AM) Bottom Line....... You wanna fly you gonna pay....... You wanna Healthcare you gonna pay....
	Report Comment planespotter, (11/19/2009 12:39:00 PM) JAL should stay where it is. AA's route structure provides much better feed traffic for them than Delta would. Not to mention that Delta is big enough in Japan already (via its purchase of Northwest). I smell a regulatory issue here...

Add Your Comment
In order to post a comment on this article, you must sign in to Tulsaworld.com. If you do not have a site account, you can create an account for free.