17-Dec-2009 8:31 AM

American Airlines offers JAL as exclusive Asian partner; could increase offer

American Airlines CEO, Gerard Arpey, met (16-Dec-2009) with Japan's Minister of Land, Infrastructure, Transport and Tourism to reinforce the airline's commitment to Japan Airlines, with the following highlights from Mr Arpey's News Conference in Tokyo:  

  • Overview of offer: "We have offered JAL a total value proposition that is superior in every way to the alternative. It offers far more commercial and financial benefits, far less risk and the best chance for JAL to achieve long-term success";
  • Exclusive Partner concept/Network synergies: "Our networks complement each other. As a result, we each have a strong incentive to push as much traffic as possible onto the other's network. The competing offer would put JAL at risk of losing customers at a time when it can least afford it. Yet, it is also clear that a withered, marginalized JAL would significantly benefit SkyTeam's immunized hub in Seoul. That is not a risk that JAL, nor the government of Japan, should take.
  • Anti-trust immunity: "A JAL-American Airlines combination can readily obtain antitrust immunity from the US Department of Transportation, which will be worth hundreds of millions of dollars to JAL in the future. We are confident that this will not be an option for JAL in any other alliance";
  • ANA/Continental/United Alliance: "An immunised partnership is critical to JAL's future, and time is of the essence. JAL must act quickly or risk losing ground as these competitors grow stronger, which could very well derail its restructuring". [more - News Conference Speech]
  • Increased Investment: American may increase a proposed capital investment in JAL "depending on the circumstances” (Dow Jones/New York Times/Associated Press/Kyodo, 16-Dec-2009);
  • Delta-JAL: American would "object loudly and stridently" if Delta was granted immunity with JAL, stating the combination “would make a mockery of open skies” (Dow Jones/New York Times/Associated Press/Kyodo, 16-Dec-2009).

American Airlines: “Conceivably there could be a bigger investment made by the oneworld, TPG and American as a group, depending on the circumstances that have to be worked out with the government and with JAL...[the bid] will enhance JAL’s opportunity for long-term success, and it will inject a large amount of much-needed capital in the short term,”  Source: New York Times/Kyodo, 16-Dec-2009.

Separately, Delta Air Lines CEO, Richard Anderson, indicated that it has a financial advantage in investing in JAL, with cash in hand worth approximately USD5.3 billion at the end of 2009 (Kyodo, 16-Dec-2009). Delta earlier offered JAL a USD1.02 billion financial package with SkyTeam alliance members, including a USD500 million investment.

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