The courtship of Japan Airlines Corp. has apparently gone into overdrive, with officials from AMR Corp.'s (NYSE:AMR) American Airlines Inc. and Delta Air Lines Inc. (NYSE:DAL) each lobbying Japanese government officials about the benefits JAL could reap from forging closer ties to each of their rival alliances.
JAL has been a basket case in recent years, losing ¥99 billion ($1.2 billion) during the June quarter and surviving now only thanks to a ¥60 billion loan it secured in June from the government-owned Development Bank of Japan Inc. The new government in Tokyo is eager to trim fat at the airline and end its dependence on public funds, and is considering nine-figure investment offers from the foreign carriers to help fund that restructuring.
American and JAL are existing partners in the Oneworld alliance, and American officials
according to a Friday Wall Street Journal report are telling policymakers and execs that a tightening of that relationship could generate $80 million to $100 million in new annual revenue and cost savings as soon as next summer. The execs claim a switch to Delta's competing SkyTeam alliance would cost JAL more than $500 million in lost revenue over two years, though it is unclear how much of that could be offset by new revenue opportunities the Japanese airline would gain as a part of SkyTeam.
Delta, meanwhile, according to sources has been touting its greater ability to streamline JAL operations thanks to its already sizable presence in the Tokyo market. A switch to SkyTeam and into a new revenue-sharing joint venture would also allow JAL to share trans-Pacific revenues with current rivals Delta and fellow SkyTeam participant Korean Air, similar to how Delta currently shares its trans-Atlantic revenues with partner Air France KLM Group.
Delta has also reportedly offered to pay the $15 million to $20 million in costs JAL would incur if it switched alliances and had to alter signage and marketing materials and perhaps move its operations at certain airports. Company president Edward Bastian according to the Journal report has been in Tokyo five of the past six weeks to lobby his case.
Delta is working with Goldman, Sachs & Co. (NYSE:GS) and public-relations firm Fleishman-Hillard, while American has hired Rothschild unit Global Advisory Japan.
While the talks continue JAL is taking steps to shrink its network,
announcing earlier in the week plans to discontinue eight international and eight domestic routes. -
Lou Whiteman
Lou Whiteman is a senior writer covering the automotive, transportation and industrial sectors. Follow him on Twitter @louwhiteman
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