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Saturday, September 12, 2009

AA is fighting for JAL

American Airlines IS fighting for Japan Airlines too. They are not going to just throw in the white towel and let Delta and Air France steal JAL from them. AA is proposing a business joint venture and seek anti-trust immunity with JAL so they will be able to work closer together to maximize their profits.

From the latest report from The Associated Press:

A spokesman for Fort Worth, Texas-based AMR, Roger Frizzell, said, "We are in discussions at the senior executive level in Japan with JAL." He declined to comment further.

The person familiar with AMR's negotiations said that while AMR might invest in JAL, the two sides had not settled on an amount or the nature of the investment. AMR could buy a stake in JAL or invest in senior debt that could be converted to stock, the person said.

However, The Financial Times reports the proposed investment from AA will not be enough to shore up JAL's financial situation.

American executives will remain in Tokyo this week to continue their discussions with JAL, the people said. While the proposed equity stake would fall well short of what JAL may need to shore up its finances, the investment may signal to other equity and debt investors that it is safe to back the Japanese airline.

According to The Wall Street Journal, the "intensive negotiations" have been going on for more than a month already.

The Japanese and US governments have been in negotiations for an "Open Skies" agreement between the two countries. Without this treaty, it will be hard for JAL and AA to obtain an immunity (the same applies to ANA and *A members, e.g. UA). If ANA does win the immunity with *A members, it will put JAL in a disadvantage if they don't seek one of their own. Without the immunity, JAL won't be able to legally discuss scheduling and pricing with its partners to maximize its profit.

For example, JAL and AA's LAX-NRT flights departs at 13:20 and 12:45 respectively. The two flights almost departs at the same time (at least when they are on schedule but we all know AA's on time departure rate. Today's flight is delayed till 06:30 on the next day LOL). Without the immunity, they can't stagger the flights to maximize traffic, say operate one in the afternoon and one around midnight.

So either with AA or DL, JAL will need to tide up closer with one of them. Preferably one from the European side too (BA can you hear me?) . To me, I am not sure if I want AA or DL. For my selfish reason, I actually prefer DL's network because AA's offerings at LAX is relatively weak. It is so hard for me to find a 400 FOPs mileage run route on AA flights. But what DL have done to NW frequent flyers is another story...

Source:
The Wall Street Journal
The Financial Times
The Associated Press

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