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In Battle for JAL, Antitrust Ruling Is Key

Stocks in this article: DAL

ATLANTA ( TheStreet) -- In the battle between Delta (DAL) and American (AMR) for a partnership with JAL, the focus has shifted.

Previously, the world's largest and second largest airlines sought to outbid each other. Now, they are debating whether U.S. regulators would approve a joint request by Delta and JAL for antitrust immunity across the Pacific, if one were to be filed.

As an example of the intensity of this debate, American CEO Gerard Arpey declared last week that "it would make an absolute farce of the Open Skies process" if regulators approve the Delta request.

Why so much attention to predicting the DOJ's intent? Because the Japanese decided they had enough of the bidding war, which turned the nation's flag carrier into an auction prize for two big U.S. companies.

Both airlines had offered more than $1 billion before the Japanese rebelled, saying they did not want any foreign investment in JAL. American's bid even includes participation by private equity firm TPG Group. Aviation consultant Robert Mann suggests this might have pushed the Japanese over the edge as far as the idea of seeking outside investors.

It is bad enough that two U.S. carriers can fly beyond Japan's principal airport, an internationally unique arrangement enabled by a post-World War II agreement, and that a U.S. airline would own a portion of their flag carrier. Now, he says, in a final insult, somebody wants to bring in a U.S. "vulture player."

As Delta bids to replace American as JAL's partner, the prize is not JAL itself, but rather JAL's pre-eminent position at Tokyo's Narita Airport, Asia's most important hub. Meanwhile, the U.S. and Japan have reached a preliminary Open Skies agreement, and some Japanese media reports have said the agreement includes guaranteed antitrust immunity for Japanese carriers JAL and ANA and their partners.

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