JAL dumps AA, defects to Delta, SkyTeam
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Jan 29, 2010
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Japan Airlines decided to dump its partnership with American Airlines and its Oneworld alliance in favor of Delta and the SkyTeam group of carriers.
American together with a private equity firm had offered to invest $1.4 billion in JAL and strengthen cooperation between the two airlines, but JAL judged an alliance with Delta -- the world's largest airline -- would produce greater benefits.
The partnership with Delta will be officially announced by new JAL Chairman Kazuo Inamori on Monday.
To solidify the new alliance, JAL intends to apply to the Japanese and U.S. governments for antitrust immunity. The airline is also examining strengthening its international network with new routes from Narita International Airport to Detroit -- the hub for Northwest Airlines, acquired by Delta last year -- and from Haneda Airport to Amsterdam's Schiphol, SkyTeam partner KLM's home airport.
Delta and JAL cover many of the same routes, allowing the two airlines to better efficiency through schedule and fare collaboration. According to estimates by the state-backed Enterprise Turnaround Initiative Corp. of Japan (ETIC) -- overseeing JAL's restructuring process -- if JAL obtains antitrust immunity, the benefits of the Delta partnership could rise to some 17.2 billion yen. Even if the JAL-Delta deal does not receive immunity, the new partnership will result in benefits of around 9.2 billion yen -- still a significant jump from the 5.4 billion yen realized through the alliance with American.
Delta had previously offered a total $1.02 billion in financial support to JAL, including $500 million in new investment. As the leader in rebuilding the airline, however, ETIC apparently inclined to the belief that foreign financing was unnecessary for recovery, and elected to restrict any involvement with Delta to business collaboration.