JAL, Delta seen forming business ties : Business : DAILY YOMIURI ONLINE (The Daily Yomiuri)

The Yomiuri Shimbun

Japan Airlines and a state-backed corporate turnaround body likely will decide that the struggling airline company will form a business and capital tie-up with Delta Air Lines, the world's largest airline, a move that would significantly reduce JAL's international route operations, sources said Monday.

With the move, JAL, which now belongs to the Oneworld alliance, will become part of the rival SkyTeam group. The tie-up is likely to make a certain measure of headway in solving JAL's financial woes under the supervision of the Enterprise Turnaround Initiative Corporation of Japan since cuts in international route operations are likely to be accelerated through an expansion of a code-sharing arrangement in the Asia-Pacific region, the sources said.

American Airlines, the world's second-largest carrier, which also was seeking a tie-up with JAL, has already begun the necessary procedures to end the negotiations. With the end of its close decadelong relationship with JAL, American is expected to be forced to downsize international business operations involving Japan.

Delta had already offered JAL a 1.02 billion dollars financial package with global SkyTeam alliance members, including a 500 million dollars investment and a 300 million dollars guarantee to cover any short-term drop in sales caused by JAL transferring to SkyTeam.

The U.S. airline also is set to cover costs JAL will incur when changing computer systems for the alliance transfer and to take over JAL's mileage program that enables customers to change air mile points with airline tickets.

Delta holds 32 percent of the market share of the Pacific route linking Japan and the United States, American 8 percent and JAL 22 percent.

With the expected tie-up, JAL can boost its long-term earning capacity through the abolition or rationalization of its own international route operations, while expanding the code-sharing agreement with Delta.

In December, Japan and the United States agreed to liberalize air traffic rules under a so-called open skies agreement, allowing Japanese and U.S. carriers to freely decide on the routes and numbers of flights between the countries.

Based on the open skies agreement, JAL and Delta are expected to apply to the U.S. authorities for antitrust immunity by the end of February.

Once they obtain the immunity, they will be able to enjoy benefits close to that of a merger, including profit sharing, by better coordinating the timetable and airfare rates of their transpacific operations.

American had said it was prepared to invest 1.1 billion dollars in JAL along with U.S. private-equity firm TPG Inc., but the tie-up between American and JAL, both Oneworld members, was seen as unlikely to produce benefits matching the investment, while JAL and the state-owned entity became increasingly reluctant to accept the investment by the private-equity firm.

(Jan. 5, 2010)

 

Anyone understand the intricacies of cap and trade. Would emissions restrictions be a reason to transfer flying?

 

Heyas 80,

If you ever go to a fNWA airplane, you might bug some fNWA guy who flew it for their copies of the NWA Vol1/Vol2. Additional resources never hurt, and NWA manuals were some of the very best I'd ever seen (lovingly illustrated in-house by two of the nicest ladies you'd ever meet).

Nu

 

Outstanding!! Where are you based?

 

Maybe... but I think it is simply because Delta is cheaper.

"With the expected tie-up, JAL can boost its long-term earning capacity through the abolition or rationalization of its own international route operations, while expanding the code-sharing agreement with Delta."

 

Heyas KC,

I have heard that any number of fNWA guys had freezes improperly applied during the AE/Displacement, and they didn't get awards they were supposed to get.

Nu

 

I can't say for sure, but at this point, I don't think so, Bar.

How's that for an answer? When do you think I shoud run?


No, seriously. I don't think so.

 

I am MSP based.

 

It is interesting to note this deal includes 300 million to cover the loss of sales from fliers tied to OneWorld & JAL. However, if I were a betting man I'd say that 300 million would never need to be paid. If anything our routing and pax flows through ATL and DFW work better than DFW and MIA. (Not sure that I understand the LAX and JFK pictures though.)

So much for merging with NWA and pulling out of the Pacific. Looks like we'll be around for a while.

Wonder if this changes the staffing picture and how. IMHO it would be great if they just pulled the mega displacements back & canceled the thing. Many of us have already enjoyed the right of passage that is the MD88 FO position. No need to do that, twice

 

Ok, Dot Connector(s). It looks like this JAL thing is really gonna happen. What does this REALLY mean for us, near and medium term?

In any event, for me, it looks like really bad news for American.