Delta CEO pushes Japan Airlines deal

Delta CEO pushes Japan Airlines deal
By Kelly Yamanouchi The Atlanta Journal-Constitution

Delta chief executive Richard Anderson pushed the benefits of a deal with Japan Airlines in a message to employees Friday.

Atlanta-based Delta and its SkyTeam alliance are trying to lure JAL away from its marketing alliance with American Airlines. They are offering $1 billion in financial assistance to JAL as it restructures.

“We are No. 1 between Japan and Europe. We’re No. 1 between Japan and the U.S.,” Anderson said. “There’s no doubt that Delta and SkyTeam are the strongest partners for Japan Airlines.”

Anderson said Delta, which recently merged with trans-Pacific power Northwest Airlines, carries about 7,500 passengers daily between the United States and Japan, while American and JAL carry fewer than 1,400 daily.

If JAL joined SkyTeam, Delta and other members carriers could offer seats on JAL flights, as well as carry passengers booked by JAL on theirs. Such alliances aim to cement flier loyalties and share in the revenue they generate.

Standard & Poor’s Ratings Services on Friday said Delta and SkyTeam’s proposal to JAL -- including $500 million of capital from SkyTeam, a $300 million revenue guarantee and $200 million of asset-backed funding -- would not affect Delta’s credit ratings or outlook.

However, S&P said that once an “Open Skies” U.S.-Japan aviation treaty is completed, antitrust immunity for Delta and JAL “could prove more challenging than a similar request from American and JAL” because Delta now has authority to fly routes to and beyond Japan, while American does not.

Antitrust immunity enables airline marketing partners to move beyond simple marketing ties and coordinate on pricing and services.

Anderson downplayed the risk that a Delta-JAL deal would not gain antitrust immunity.

“The DOT has approved every antitrust immunity it’s received,” Anderson said. “We shouldn’t be discussing the regulatory issues, we ought to be discussing long-term commercial, underlying business.”

American said it has its own “value proposition” to JAL , calling it “superior in every way.” American said it is confident its partnership with JAL can get antitrust immunity.

The Air Line Pilots Association at Delta backs the SkyTeam-JAL deal. Union chairman Lee Moak this week said the deal would help “enhance the job security and long-term career prospects of our pilots.”

Delta, SkyTeam may plow $1 billion into JAL
By Christopher Hinton

NEW YORK (MarketWatch) -- Delta Air Lines and its SkyTeam alliance partners intend to offer Japan Airlines Corp. $1.02 billion in funding to lure the troubled carrier from rival American Airlines and the Oneworld alliance, according to news reports Wednesday. The offer follows weeks of posturing by both airlines, which are eager to use JAL as an entryway to the fast-growing Asia market. Delta's proposal includes $500 million from SkyTeam, a $300 million guarantee from Delta, $200 million in asset-backed funding, and $20 million to cover any transitional costs, the reports stated, citing Delta documents from a news conference in Tokyo. Meanwhile, American is looking to team up with private-equity firm TPG to fund JAL, which is also considering bankruptcy and a government bailout package. American is a unit of AMR Corp.

AMR Says Offer for Japan Air Is at Advanced Stage
By Kiyotaka Matsuda

Nov. 19 (Bloomberg) -- American Airlines said preparations for an investment in Japan Airlines Corp. are at an advanced stage after Delta Air Lines Inc. announced a package of incentives to lure the Asian carrier into a new alliance.

Japan Air, as the airline is known, would face a regulatory risk in leaving American’s Oneworld group and joining Delta’s SkyTeam, Theo Panagiotoulias, American’s Pacific director, told reporters today in Tokyo.

Delta and AMR Corp.’s American, the world’s two biggest airlines, are vying for access to JAL’s routes in its home country and in China, Asia’s largest air-travel market. Atlanta- based Delta unveiled its $1 billion proposal yesterday, while American hasn’t detailed its plan to keep JAL in Oneworld.

“American has much at stake in maintaining an alliance with JAL,” Standard & Poor’s credit analysts Betsy Snyder and Philip Baggaley said today in a statement. “By itself, it does not have a large presence in the Pacific market. Therefore, if Oneworld cannot keep JAL in the alliance, it risks material loss of revenues in the Pacific.”

People familiar with the matter have said American and private-equity firm TPG Inc. may offer as much as 130 billion yen ($1.47 billion) to JAL, which is seeking a government rescue and new investors after losses in three of the last four years.

JAL probably will stay in Oneworld, Dow Jones reported, citing Vice President Shuta Saito. The Tokyo-based carrier will make a decision after agreeing on how to restructure itself with Japanese government aid, Dow Jones reported.

Sze Hunn Yap, a spokeswoman at Japan Air, declined to confirm or deny Saito’s comment. Charley Wilson, a spokesman for American, declined to comment in order to “respect the JAL restructuring process.”

Oneworld’s Response

American’s Oneworld partners are preparing their own proposals, which would be offered along with the plan from American and TPG, to help persuade JAL to stay. There is no schedule for making details public, Oneworld Managing Director John McCulloch said today in an interview from Vancouver.

“A lot of this is moving around, almost by the day,” he said. Other Oneworld airlines aren’t considering equity investments, and instead would help through strengthened alliances, McCulloch said.

Should JAL leave Oneworld in favor of Delta’s SkyTeam alliance, regulatory approval for antitrust immunity “could prove more challenging” because Delta already has the largest presence among U.S. carriers that serve Tokyo, S&P wrote today in a separate note.

The proposed investments by American and Delta wouldn’t affect either carrier’s debt ratings or outlook, S&P said.

Delta fell 17 cents, or 2.2 percent, to $7.59 at 4:15 p.m. in New York Stock Exchange composite trading, while AMR dropped 22 cents, or 3.8 percent, to $5.55. AMR and TPG are both based in Fort Worth, Texas.

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