AMR Could Survive Loss of Japan Deal

DALLAS (TheStreet) -- It's difficult to imagine that American(AMR Quote) would lose its partnership with Japan Air Lines, but it could happen.

At Tokyo's Narita Airport, about 40% of the passengers on American's five daily arrivals connect on JAL flights, so the short-term impact would be disastrous were Delta(DAL Quote) to succeed in its continuing efforts to replace American as JAL's partner. For investors, the battle is important because of the major hit American would take in the trans-Pacific were it to lose.

But American would not cease serving major markets throughout Asia. And long term, the importance of Japan and a Narita hub could diminish, as China grows and as long-awaited arrivals of the Boeing 787 and the Airbus A350 make it viable to one day fly non-stop from the U.S. to a longer list of cities in China.

American's access to China includes its Chicago-Shanghai route and a Chicago-Beijing route, which it will begin flying in April. In Shanghai, American code shares on China Eastern flights to seven cities in China as well as a Los Angeles flight. Code shares enable airlines to write tickets on one another's flights.

In Hong Kong, American code-shares on flights operated by Oneworld partner Cathay Pacific to Los Angeles, San Francisco and New York as well as to five cities in Asia. In Taipei, Taiwan, American code shares on EVA flights to Los Angeles, San Francisco and Seattle. American also operates five daily flights to Narita.

"Losing (JAL) would be a significant setback, but it would not be the end of the world for American," says aviation consultant George Hamlin. While "Japan was the key market of the post World War II era, in relative terms it is declining," he says. "The Japanese economy has not grown very much in the last decade, while the Chinese economy is expanding rapidly."