Delta offers JAL $1 billion package to join SkyTeam

Delta Air Lines revealed yesterday that it has made a comprehensive offer to Japan Airlines to switch from oneworld to SkyTeam that includes financial assistance and guarantees totaling $1 billion, saying it wants JAL to be "the face of Asia" for DL.

Struggling JAL is attempting to enter into a government-backed restructuring that would allow it to avoid bankruptcy, but no plan has been agreed to and Japanese Transport Minister Seiji Maehara said yesterday that a court-administered bankruptcy is a possibility (ATWOnline, Nov. 16). He said his past assurances regarding JAL were not meant to rule out bankruptcy but to communicate that the government would make sure that the airline would not "collapse or disappear."

DL President Edward Bastian told reporters in Tokyo that DL and other SkyTeam partners are willing to provide a $500 million equity injection as well as an additional $200 million in asset-backed financing. It also would guarantee the $300 million in annual revenue that JAL claims it now generates owing to its membership in oneworld. DL reiterated that it would cover the IT costs of making an alliance switch, estimated to be about $15-$20 million.

Bastian asserted that "SkyTeam is by far the strongest partner for Japan Airlines and the best ally to ensure JAL's growth and stability." SkyTeam currently does not have a Japanese affiliate but has an Asia/Pacific presence with Korean Air and China Southern Airlines. Bastian said the Tokyo-based carrier "for Delta would represent in many ways the face of Asia."

He claimed JAL's annual revenue would be boosted by around $400 million through access to SkyTeam passengers. In a US regulatory filing, DL said it has "discussed a possible marketing alliance and joint venture with Japan Airlines covering routes between North America and Asia, including a related capital investment in Japan Airlines by us and one or more other [SkyTeam] members." Bastian told reporters that a JAL alliance switch could be achieved in less than a year. He added that the DL/SkyTeam offer is "unconditional" and does not depend on how much financial assistance the strapped carrier receives from the Japanese government.

American Airlines has indicated that it will put up a strong fight to keep JAL in oneworld, including challenging a move to SkyTeam on antitrust grounds owing to DL subsidiary Northwest Airlines' strong presence in Japan. AA reportedly has teamed with TPG Capital to propose investing $300 million in JAL (ATWOnline, Nov. 12).