ATW Daily News

American, oneworld offer incentives to keep JAL in alliance

Wednesday January 13, 2010

American Airlines yesterday confirmed that its offer to invest in Japan Airlines in conjunction with TPG Capital has been raised by $300 million to $1.4 billion and said it and oneworld partner British Airways will enhance cooperation with the troubled Tokyo-based carrier to enable it to generate an additional $500 million in revenue over the next three years.

AA has been jockeying with Delta Air Lines to take a stake in JAL, which appears to be on the verge of entering a court-monitored bankruptcy proceeding (ATWOnline, Jan. 12). However, reports from Tokyo indicate that Enterprise Turnaround Initiative Corp. of Japan, which will oversee JAL's restructuring, favors rejecting foreign investment in the carrier and instead will push it toward noncapital commercial cooperation with either AA or DL, which is attempting to lure JAL to SkyTeam.

AA Executive VP-Finance and Planning and CFO Tom Horton, speaking at a Tokyo news conference, said oneworld has an "extraordinary commitment" to JAL, which he claimed already generates around $500 million annually from its association with the alliance. Enhanced cooperation with oneworld partners can generate an additional $500 million over three years, he asserted.

He said the incremental revenue would come primarily from closer ties with AA and BA. An antitrust-immunized transpacific joint venture between JAL and AA will "conservatively" generate an extra $300 million over three years, he stated, adding that AA "will guarantee this $100 million in new annual revenue for the first three years of the venture. . .to remove uncertainty."

In addition, BA "has proposed a series of enhancements to its business relationships with JAL that will result in approximately $200 million in revenue over three years," Horton said. BA Director-Investments Roger Maynard said his airline will "facilitate any decision by Japan Airlines to start services from [Tokyo] Haneda to [London] Heathrow" by providing JAL with LHR "infrastructure. . .and slots" necessary for such services. He added that BA would "double the number of European cities that JAL can reach through codesharing" on BA flights from April.

Horton said oneworld partners Qantas and Cathay Pacific Airways are willing to assist JAL with its "complicated restructuring" by providing "expertise," including QF helping JAL launch an LCC affiliate based on its JetStar Airways model. CX GM-Japan Simon Large noted that oneworld is willing to guarantee that "JAL is the exclusive northest Asia partner in this alliance."

JAL executives and the Japanese government have been circumspect about discussing details of the airline's restructuring publicly, but Japanese Transport Minister Seiji Maehara did say yesterday that JAL's largest creditors are on board with the airline's recovery plan, though he did not confirm details of the plan.

by Geoffrey Thomas and Aaron Karp

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