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JAL, American and Delta: a confused chronicle of events

Luc Citrinot, eTN  Feb 11, 2010

The announcement by Japan Air Lines to finally keep its partnership with American Airlines –and consequently with Oneworld Alliance- puts an end to a soaring battle between American and Delta Air Lines to lure the Japanese carrier. Rumors abounded over the last six months of a possible departure from the Japanese carrier from Oneworld to Skyteam by switching its USA partner to Delta Air Lines. The chronicle of Japan Airlines decision looks rather chaotic: On January 15th, quoting ‘JAL internal sources’, the Yomiuri Shimburi newspaper confirmed that Japan Airlines had reached an agreement over a tie-up with Delta Air Lines. Delta Air Lines would inject US$ 1 billion to JAL to help it switch alliances. The information was largely echoed by press agencies around the world. The tie-up would then translate into code-share flights with Delta and a request to US authorities for antitrust immunity on trans-pacific routes. JAL filed in the meantime for bankruptcy protection and entered into a restructuring process with the support of the Japanese government.

The announcement of JAL flirting with Delta had already a consequence: American Airlines and its Oneworld partners lifted their financial help to the ailing carrier from US$ 1.1 to US$ 1.4 billon. On January 18, Dutch daily De Telegraaf reported that Delta and Air France-KLM had reached an agreement where the Franco-Dutch carrier would contribute to the financial package with hundreds of millions of euros. "JAL has been receiving official advice that a tie-up with Delta would be more advantageous, according to people familiar with the matter, on the grounds that Delta has a more robust trans-Pacific flight network and a stronger Asian network than American Airlines,” quoted the newspaper.

Then, at the end of January, came on board Masaru Onishi, JAL new president. Who declared that discussions with both American and Delta were going on with a final decision being taken as “soon as possible”. On February 8th, AFP wrote that “JAL has decided to keep up its current tie-up with American Airlines and end talks to defect to Delta Air Lines, local (Japanese) media reported on Monday”. The decision was finally confirmed a day later with CEO Onishi following explanations: “We have analyzed this issue in great detail, and we are excited at the prospects in terms of the convenience and benefits for our customers. We also firmly believe that the advantages of this development with American Airlines can strongly support JAL at a time when we are striving towards the revival of our business. We certainly look forward to a deeper, more mutually-beneficial relationship with our long-time partner.” JAL as a member of Oneworld since 2007 has also a better knowledge of American Airlines’ business ways. And according to JAL management, to remain with the same alliance will be more cost-effective and less confusing for JAL customers…

JAL and American will now jointly apply to the US Department of Transportation (DOT) and Japan's Ministry of Land Infrastructure, Transport and Tourism for anti-trust immunity on transpacific routes. Once approved, both carriers intend to enter a joint business venture with a better coordination of networks, flight schedules and passengers services.

Interestingly, until a final decision was announced, all the quotes reported by newspapers and press agencies were anonymous. As if it was in fact part of a manipulation’s game. Looking more closely to the deal with American Airlines, Japan Airlines appears as the absolute winner. Not only because the airline secured more money than initially planned but also because it will retain a dominant position on trans-Pacific routes from Japan/Korea within Oneworld. The alliance is still relatively weak in the whole Asia as it has only Cathay Pacific as another major partner in the region and no partners in Southeast Asia. American Airlines is historically also weak in Asia. It offers only five daily flights to Tokyo from Chicago, Dallas, Los Angeles and New York JFK. To China, the airline flies only Chicago-Shanghai and will launch in April a new daily flight from Chicago to Beijing.

By comparison, Delta is already in competition with JAL as it has its own hub in Tokyo Narita serving 23 cities non-stop including 14 Asian and Pacific cities. JAL decision to stay with Oneworld will probably translate into a further strengthening of Delta position in Asia. Since its merger with Northwest, Delta already accounts for over 30% of U.S. air travel to Tokyo.

This is the sense to give to Delta official release following JAL’s announcement: "Delta is well positioned as the No. 1 carrier between the U.S. and Asia. Customers can continue to count on Delta for unmatched access to Japan, with nonstop service between 10 U.S. destinations and Tokyo. With recently announced plans to invest $1 billion in our product, Delta remains committed to providing a leading option for travel across the Pacific. Delta's competitive Pacific presence, along with our trans-Atlantic joint venture with Air France/KLM and leading position in global markets, will continue to allow Delta and our SkyTeam partners to meet demand worldwide."

JAL, American and Delta: a confused chronicle of events

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