Airlines dangle $1.1b deal before JAL

Tokyo : American Airlines said it and other members of the Oneworld airline alliance along with private equity fund TPG are willing to invest $1.1 billion (Dh4 billion) in Japan Airlines to prevent it defecting to Delta Air Lines and the rival Skyteam group.

Delta has said that it and other SkyTeam members are ready to offer JAL a total financial aid package of about $1 billion, including a $500 million equity investment. Delta said yesterday it may also team with a fund to sweeten its proposal.

Both US airlines are keen to gain access to Japan Airlines' network in Asia even as the former national carrier seeks a state bailout to avoid bankruptcy, hit by sliding demand and saddled with some $15 billion in debt.

"Our investment and our proposal would be part of an overall restructuring plan led by the government, which would restore Japan Airlines to financial health," Tom Horton, chief financial officer of American parent AMR Corp, told a news conference in Tokyo.

American had said previously it could invest in JAL with TPG but had not unveiled an exact figure. It estimated the total benefit to JAL would be $1.8 billion when factoring in an estimated $700 million for the net present value of antitrust immunity over a period of 10 years.

Treaty

Both US carriers have said they would apply for antitrust immunity with JAL under an "open skies" treaty to liberalise air travel between the US and Japan.

The accord is expected to be agreed by the two governments later this month.

Shares of JAL closed unchanged at 92 yen, underperforming a 3.8 per cent rise in the benchmark Nikkei average.