ATW Daily News

AA, Delta jockey for JAL stake; DBJ considers bridge loan

Thursday November 12, 2009

American Airlines and Delta Air Lines each continue to express a strong interest in financially troubled Japan Airlines, which reportedly is negotiating a ¥100 billion ($1.1 billion) short-term bridge loan with the Development Bank of Japan to fortify its cash position as it develops a longer-term restructuring plan.

JAL and the Japanese government are in the process of determining how to revive the strapped airline, which is expected tomorrow to announce a heavy loss for its fiscal first half ended Sept. 30 (ATWOnline, Nov. 10). Japanese media have reported that DBJ likely will provide a short-term loan. It already is JAL's largest creditor, previously extending the company ¥230 billion in loans.

Once the broad parameters of a restructuring plan are agreed, JAL is expected to reenter negotiations with AA and DL about a potential stake sale. At issue is whether JAL remains AA's partner in oneworld or joins DL in SkyTeam.

"We stand ready to invest in JAL," AA Executive VP and CFO Tom Horton said this week in Tokyo, according to Bloomberg News. He added that TPG Capital could team with AA "to be part of a comprehensive recovery plan." Bloomberg reported that AA and TPG are considering investing a combined $300 million.

AA Chairman and CEO Gerard Arpey has said that JAL's deciding to "change horses" to SkyTeam would be "very bad" for oneworld. Meanwhile, The Wall Street Journal reported that DL, in addition to taking a stake, would be willing to pay $15-$20 million to cover the costs of JAL's switch to SkyTeam.

On another front, oneworld member Qantas has offered to help JAL set up a low-cost affiliate modelled on its Jetstar Airways brand. CEO Alan Joyce said QF has ruled out taking a stake in JAL but has made an offer to provide assistance with establishing an LCC to the Japanese government and JAL management. "We will not be investing funds but we certainly want to help Japan Airlines with a low-cost product," Joyce told ATWOnline.

by Aaron Karp and Geoffrey Thomas

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