JAL shelves talks with Delta and AA

6th Oct 2009
JAL shelves talks with Delta and AA

Beleaguered Japan Airlines has temporarily shelved its plans to seek a bailout from a foreign carrier until a Japanese government taskforce finishes a review of its financial structure.

JAL, Asia’s largest airline by revenue, is fighting for survival after the incoming government last week refused a plea to help reduce it $15 billion debt pile, and instead criticised the turnaround plan as “insufficient”. It said any bail-out would be subject to the launch of a task force to review the restructuring process.

Delta and a rival group led by American Airlines have been in talks to invest in JAL. Both airlines would use the investment to gain a stronger foothold in Japan and the rest of Asia. Delta has offered to invest about 30 billion yen ($334 million).

However, JAL has now decided to focus on gaining the support of the new government by putting together a restructuring plan first. It is also keeping its door open to both Delta Air Lines and American Airlines after the turnaround plan has been drawn up.

In late August the Democratic Party came to power in a landslide election victory, ending the rule of the Liberal Democratic Party, which had granted JAL three bailouts since 2001.


The Democrats have said JAL’s restructuring plan, which includes cutting 6,800 jobs and scrapping 50 routes, did not go far enough and it assigned a task force to push through more drastic cost cuts.

JAL is seeking 250 billion yen in funding to carry it through the end of the financial year in March 2010.

American teamed up with British Airways and Qantas Airways to keep JAL in the Oneworld Alliance grouping of airlines. They said that executives from all three carriers met with JAL in September.

Delta has been courting JAL to join the rival SkyTeam alliance. Fellow SkyTeam member Air France-KLM was a potential partner with Delta for an investment in JAL.

The airline lost more than one billion dollars in the April-June quarter. It has forecast a net loss of 63 billion yen in the year to March 2010, after a 63.2-billion-yen deficit last year.


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