19-Nov-2009 8:46 AM

American Airlines/oneworld and Delta/SkyTeam fighting for JAL

American Airlines stated (18-Nov-2009) it is "confident" that the total value proposition it, and its oneworld alliance partners, can offer Japan Airlines (JAL) is "superior in every way to any alternative". [more]

American Airlines: "American and its oneworld partners are confident that the total value proposition they offer JAL is superior in every way to any alternative. An offer to make up for lost revenue at best merely gets JAL back to status quo while introducing costly disruptions and distractions that would naturally follow a risky move to switch alliances amid a massive financial restructuring. American stands ready to make a significant investment in JAL and remains confident that an American-JAL partnership can readily obtain antitrust immunity as early as the middle of next year, which would allow JAL to realize approximately USD100 million in revenue annually in future years. American strongly believes that benefit can't be matched by another partner, and it would be in addition to the approximately USD500 million in annual revenue that oneworld delivers to JAL today. When you add up the facts, the most value and best long-term solution for JAL comes from remaining with oneworld so that it can continue to focus on its recovery with partners that can help it build a stronger foundation for the future," Company Statement, 18-Nov-2009.'

American Airlines and TPG also reaffirmed their readiness to invest in JAL (Bloomberg/Kyodo, 19-Nov-2009). The Nikkei has that reported that American’s bid may consist of USD1 billion from TPG and USD300 million from the airline.

American Airlines: "American and its partner, TPG, stand ready to deliver significant value to JAL through a strengthened commercial relationship that will be part of a comprehensive recovery plan — if invited, welcomed and deemed appropriate by JAL and the Government of Japan," Company Statement. Source: Bloomberg/Kyodo, 19-Nov-2009.

Meanwhile, Delta Air Lines President, Edward Bastian, stated Delta and its SkyTeam alliance partners have prepared a USD1.02 billion offer aimed at attracting JAL away from American Airlines/oneworld, with the Nikkei English News adding that Delta may reportedly provide aid to JAL before the Enterprise Turnaround Initiative Corp of Japan decides to support the carrier’s reorganisation efforts. The funding proposal is reportedly as follows (Associated Press/Bloomberg/Kyodo/Financial Times/Reuters/Dow Jones/AFP, 18-Nov-2009):

  • Capital investment: USD500 million capital investment;
  • Revenue guarantees: USD300 million;
  • Asset-backed financing: USD200 million;
  • Cost to cover alliance change: USD20 million. 

Mr Bastian stated Delta is "by far the strongest partner for Japan Airlines", adding that he believes JAL's current partnership in North America as part of the oneworld alliance has hurt the airline, with capacity between North American and Japan declining in recent years. According to Mr Bastian, Delta handles 3.7 million customers p/a between the US to Japan, more than five times the American Airlines’ 700,000 customers. He added that SkyTeam serves 1.3 million customers a p/a Europe to Japan, triple the 430,000 carried by Oneworld. He also estimated that JAL's annual revenue would grow by USD400 million if the Japanese carrier joins SkyTeam, adding that he expected transition between the alliances “can be completed within one year or less”.

Air France-KLM CEO, Pierre-Henri Gourgeon, added that the USD1.02 billion offer is only a preliminary proposal and any outcome will depend on discussions with JAL and the Japanese Government that is still to take place, adding that the proposal is “a way to respond to other proposals made by American Airlines" (Dow Jones, 18-Nov-2009). Mr Gourgeon, who stated Air-France KLM is “ready to make an investment” in JAL, added that any eventual contribution by SkyTeam would not necessarily be split equally among the SkyTeam partners, adding, “all it means is that certain members of SkyTeam have accepted to invest”. Seperately, China Southern Airlines, the second largest member of SkyTeam by passenger numbers, stated it is “involved in the incentives package”. 

Air France-KLM: “We are willing to attract Japan Airlines into SkyTeam if they’d like to move. We’re making an effort to explain to them that it is very attractive and very interesting," Pierre-Henri Gourgeon, CEO. Source: Bloomberg, 18-Nov-2009.

Delta Air Lines: "It's clear that SkyTeam is by far the strongest partner for Japan Airlines and the best ally to ensure JAL's growth and stability in the decades to come," Edward Bastian, President. Source: 18-Nov-2009.

Meanwhile, Japan Transport Minister, Seiji Maehara, told a Diet Committee that he “never said the government would not allow bankruptcy protection” for JAL, instead stating it would ensure it did not “collapse and disappear” (Bloomberg/Kyodo/Reuters, 19-Nov-2009).  

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