Delta, alliance partners to prepare $1 billion package for JAL+

TOKYO, Nov. 18 Kyodo -
Delta Air Lines Inc. said Wednesday that the U.S. carrier and its global
alliance partners are ready to offer a financial package totaling more than $1
billion for struggling Japan Airlines Corp. as they try to woo Japan's top
airline to join their SkyTeam group.

JAL, now seeking a turnaround under state supervision, has stepped up separate
talks with two of the world's biggest air carriers -- Delta and American
Airlines Inc., a unit of AMR Corp. -- to receive badly needed capital
investment even as the Japanese government has refused to rule out the
possibility of legal liquidation.
American Airlines, the second-largest U.S. carrier, is also scrambling to
prevent JAL's defection from the oneworld alliance to which the two airlines
belong, reaffirming its readiness to invest in the Japanese carrier with major
U.S. private investment firm TPG Inc.
In a visit to Tokyo, Delta President Edward Bastian said the SkyTeam group, to
which Delta belongs, plans to inject $500 million in non-voting equity capital
into JAL, emphasizing that the alliance would rely on its own capital rather
than private equity.
''It's clear that SkyTeam is by far the strongest partner for Japan Airlines
and the best ally to ensure JAL's growth and stability in the decades to
come,'' Bastian told reporters in Tokyo.
He added that JAL, which is anticipating its fourth annual loss in five years
this fiscal year, could expect an increase of $400 million in annual revenue
through a boost in customer numbers by joining SkyTeam.
The world's biggest carrier will also cover $20 million in costs for JAL to
switch from the oneworld alliance, with Bastian adding that the transition
process is likely to take a year or less, instead of the two years claimed by
American Airlines.
''We have told JAL that we would bear the entire cost, whatever it is,''
Bastian said, also arguing that a JAL-Delta partnership would likely be granted
anti-trust immunity.
Delta would additionally guarantee $300 million in estimated revenue that JAL
currently generates with American Airlines and provide $200 million in
asset-backed financing for the Japanese airline.
Bastian said SkyTeam is ready to move as fast as necessary, with JAL President
Haruka Nishimatsu saying earlier the company will reach a decision on capital
tie-up talks with foreign carriers by the year-end.
Delta has been aggressively courting JAL because SkyTeam, which also includes
the Air France-KLM Group and Korean Air, lacks a Japanese partner. JAL's rival
All Nippon Airways Co. belongs to the Star Alliance.
''JAL, for Delta, would represent in many ways the face of Asia,'' Bastian said.
JAL, which incurred a group net loss of 131.22 billion yen in the
April-September period, has applied for financial support from a
government-backed corporate turnaround body -- the Enterprise Turnaround
Initiative Corp. of Japan.
But whether the company will be able to secure its fourth government bailout in
less than a decade is still unclear, with thorny questions remaining over the
feasibility of its restructuring measures, especially slashing its high
corporate pension benefits.
''I've never said that a legal liquidation would not happen,'' Seiji Maehara,
minister of land, infrastructure, transport and tourism, said at a
parliamentary committee meeting Wednesday morning.
His remarks sent JAL shares plummeting to an all-time intraday low of 94 yen on
the Tokyo Stock Exchange, falling below 100 yen for the first time since the
carrier integrated operations with Japan Air System in 2002. JAL's share price
ended down 4 yen, or about 4 percent, at a record-low close of 98 yen.
But Delta's Bastian said SkyTeam is ready to support JAL even as it faces the
risk of bankruptcy proceedings.
''We believe JAL needs to survive for the long-term interest of the Japanese
people,'' he said. ''Our offer is unconditional.''
==Kyodo
2009-11-18 22:30:54