30 September 2009 - Japan Airlines widely is reported to be in separate discussions to sell a stake to Air France-KLM, American Airlines or Delta Air Lines. Financial involvement by Air France-KLM or Delta could pull Japan Airlines to the SkyTeam alliance from oneworld, while a deal with oneworld founder AA would strengthen existing ties. The financially troubled Japanese carrier also seeks a government bail-out, according to published reports.
JAL last month announced a 30 percent drop in revenue and an operating loss for its air transportation segment of 84.2 billion yen (US$881 million) for the quarter ended 30 June, dragging the companywide loss to 99 billion yen (US$1 billion). "Operating conditions compared to a year before are starkly harsher," according to a JAL statement. "Reflecting these circumstances, first- and business-class traffic were significantly down due to cutbacks in the number of business trips or downgrades to economy-class business travel." The company also cited the effects of the H1N1 influenza outbreak.
Adding that "business travel is projected to remain slow," JAL said it would make "drastic adjustments to our network." According to
Air Transport World, those adjustment will include the elimination of 50 routes, "with a heavy emphasis on international reductions."
AA Bolsters Cash, Confirms JAL Talks
American Airlines parent AMR Corp. in a 24 September filing to the U.S. Securities and Exchange Commission confirmed it was "in discussions with the Japan Airlines Group ... about ways to broaden and deepen our relationship." The company wrote that options include "a joint business relationship with JAL and possible capital or financing arrangements."
AMR CEO Gerard Arpey during a 17 September conference call with analysts and media said the airline is "confident that continuing and expanding the partnership that we have with JAL, along with the other oneworld members, will by a very wide margin represent the best path forward for Japan Airlines during these difficult economic times.
"We have a deep, longstanding partnership with Japan Airlines that today is producing hundreds of millions of dollars of value," Arpey continued. "We have every indication that Japan Airlines wants to remain a major global airline and a significant global partner and not be relegated to becoming a feeder carrier."
According to a
Reuters report, a Japanese government task force exploring options for JAL said splitting the airline into parts is a possibility, while Japanese Transport Minister Seiji Maehara ruled out a possible bankruptcy filing.
Arpey was speaking after AMR Corp. announced that it secured $2.9 billion in additional liquidity and aircraft financing (followed a week later by announcements that the company had raised another $1.3 billion through sales of stock and secured notes), stoking speculation that it may be readying a bid for part of JAL.
According to
PlaneBusiness Banter founder and editor Holly Hegeman, AMR may have little choice. "Japan Airlines is broke. They are deeply in debt and losing money hand over fist," she said during a speech this month at The Beat
Live conference in Austin, Texas. "However, Japan Airlines also is an extremely important anchor point in the Asia-Pacific game, and it's one that oneworld cannot afford to lose. The reports that Delta/Air France-KLM were going after Japan Airlines forced American's hand and it had to go public saying, 'No, we're going after Japan Airlines.' This is a no-brainer. I don't care what American has to do--what British Airways, Qantas and others in oneworld have to do--they will fight. They will do whatever it takes to keep Japan Airlines in oneworld. They will give them cash, kiss their knees, whatever it takes."
Long independent from any global alliance--but a partner to many global airlines--JAL in April 2007 officially joined oneworld. It has been an AA marketing partner for more than 10 years.
Like AMR, Delta, too, recently raised cash. About $2.1 billion in new financing will be used partly to refinance the bank credit and revolving credit facilities of Northwest Airlines, which Delta acquired last year, with the rest available as $600 million in incremental liquidity. The airline has not publicly commented on the possibility of bidding for a part of Japan Airlines.
Meanwhile, the United States is seeking to hammer out a more liberalized air services treaty with Japan, according to a U.S. Department of State blog posting by deputy assistant secretary John Byerly. According to
Reuters, JAL's financial troubles prompted negotiations this summer between the countries, with the next round of talks scheduled for late October.
