AA loses JAL
 

Looks like pretty much a done deal

From today's Daily Yomiuri (Japanese Newspaper).

JAL, Delta seen forming business ties
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)

Good job Arpey...

JAL was looking to leave OneWold. If not; this whole drawn out bidding war would not have happened. They would have just partnered with American. SkyTeam brings a huge revenue stream and a much larger worlwide route structure and codesharing opportunities with SkyTeam's 9 airline partners.

Why would JAL go with KMart when Saks Fifth Avenue is knocking at the door?

I'm proud enough of DAL, but I don't think there is any such comparison to be made in terms of brand or product. AMR is a good airline.

Unless you mean in terms of network size. In which case your comparison is backwards. JAL would rather have more customers. DAL would rather have HND access. In effect, DAL is the Walmart, and JAL offers prime store locations.

Inside "joke". Don't read anything of actual value into the post. Believe me - there was nothing of actual value in its original context.

PIPE

I wonder if AMR will be shopping to work with another asian carrier.

They might go after Korean...

DAL's backup plan was to go shopping, so I am sure AMR's is too!

Agreed...also maybe a large Chinese carrier. Air China??? China Eastern???