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JAL warned of ‘enormous risks’ if deciding to leave Oneworld

Date Posted: 2009-11-25

American Airlines is warning Japan Air Lines there are consequences if the ailing Japanese carrier chooses to leave the Oneworld in favor of another airline alliance that has Delta Air Lines at its head.

Delta, the largest American air carrier, has been wooing Japan Air Lines to jump ship and move to SkyTeam Alliance . American Airlines, a leader in the Oneworld alliance that JAL joined several years ago, is telling cash-strapped JAL to stay the course with Oneworld, promising the alliance will insure $500 million in annual revenues and an additional $100 million if the two companies can work out a deal for getting anti-trust immunity.

“There is very minimal risk in staying with Oneworld as opposed to joining SkyTeam, which delivers enormous risk,” says American Airlines Asia-Pacific vice president, Theo Panagiotoulias. JAL is trying to decide in the next few weeks whether to stick with Oneworld or switching to SkyTeam in its search for cash capital to carry it past a fourth year of losses in the last five years operations. “It’s not a war between two carriers over JAL,” says Panagiotoulias. “This is the right choice for JAL’s future.”

Panagiotoulias won’t talk numbers in what his group is offering JAL, but financial analysts suggest American is prepared to inject about ¥30 billion, while U.S. investment firm TPG Inc., is reportedly offering another ¥100 billion. He says only that American Airlines is prepared to make “a significant investment” in JAL in concert with TPG once the Japanese government gives the green light.

Delta, meanwhile, says it is offering—together with other members of the SkyTeam Alliance—a financial package totaling more than $1 billion, including $500 million in non-voting equity stock and another $300 million in revenue guarantees. Delta’s president, Edward Bastian, is also promising JAL another $400 million in annual revenues through increases in customer numbers as a member of SkyTeam.

Americans’ Panagiotoulias brushes the Delta offer off, noting regulatory risks, plus JAL’s owning 60%+ of the Japan-U.S. market. He says joining SkyTeam would risk Tokyo’s position as an Asia-Pacific Regional Hub, because Korean Air is also a part of SkyTeam, and is promoting its Inchon International Airport.

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