American Airlines, Delta Air Lines trying to invest in debt-ridden Japan Airlines

American Airlines, headquartered in Fort Worth, Texas, the United States, is considering making an equity investment in Japan Airlines, the flag-carrier airline of Japan.

A Japan Airlines 747-300

The move is seen by aviation analysts as an attempt by American Airlines to strike more trans-Pacific joint deals with its Asian partner and also to thwart a possible bid by the United States-based Delta Air Lines to woo the debt-ridden Japan Airlines (JAL).

According to the analysts, American Airline’s readiness in invest in Japan Airlines could set off a “bidding war” between American Airline and its rival airline Delta Air Lines and might eventually lead to reshaping the future scenario of global aviation alliances.

The website ft.com reported that executives of American Airlines visited Tokyo a week ago in an effort to formulate a strategic partnership with Japan Airlines after American Airlines learned that Delta Air Lines had offered to invest around $300 million in the cash-strapped national carrier of Japan.

Delta Airlines wanted that, in return for making an equity investment, Japan Airlines should leave the Oneworld airline alliance – which includes British Airways, American Airlines and Qantas Airways – and join the SkyTeam alliance, of which Delta is a member, as well as form a strategic partnership between Delta and JAL.

According to the ft.com report, the offer from Delta Air Lines came at a time when Japan Airlines was being pressured by the government of Japan to curtail losses and stabilise the financial position. Delta’s offer also came when Japan and the United States were discussing signing a bilateral ‘Open Skies’ agreement, which would result in relaxing access to hub-airports in both countries.

Now, by offering an equity investment in Japan Airlines, American Airlines intends to block the bid by Delta Air Lines and enter into an accord on a joint venture before the United States and Japan sign the Open Skies pact, the website ft.com quoted aviation analysts as saying.

Japan Airlines – which is in its fourth year of a restructuring scheme – already sold its non-core assets as also got rid of jobs and losing routes. However, these efforts have so far not succeeded in taking the company out of the red, and it still has debts amounting to  Y721 billion ($8 billion).
Japan Airlines had reported a net loss of Y99 billion in the first quarter of the present fiscal. In June 2009, the carrier had obtained an emergency funding worth Y100 billion from its existing creditors after the government of Japan stood guarantee to the new loans.