Like Delta, AMR Is in Talks With JAL

American Airlines is talking to financially troubled Japan Air Lines about a potential investment. American likely is trying to head off rival Delta, which is also in talks with JAL.

Author:: Ted Reed
Publish date:: Sep 14, 2009 4:54 AM EDT

Updated from 12:03 a.m. EDT

DALLAS (

TheStreet

) --

AMR

(AMR)

said it too is talking with financially troubled

Japan Airlines

, which is seeking to raise money from potential partners.

Published reports on Friday said

Delta

(DAL) - Get Report

is talking with JAL about an investment: Delta has declined to comment. JAL is seeking to raise $2.8 billion from banks, investment funds and others including airlines, the Japanese business daily

Nikkei

reported Sunday. "American is in conversations with Japan Airlines at the senior level," said Roger Frizzell, an AMR representative, Sunday. He declined to elaborate.

JAL has the largest hub at Tokyo Narita, Asia's most important airport because of its importance to Japan and its web of connections throughout the continent.

Shares of Japan Airlines closed Monday almost 8% higher to 176 yen on the Tokyo Stock Exchange.

Japan's largest airline said in a statement Monday that media reports of tie-ups with foreign carriers are not based on official information from the company and that nothing has been decided.

The world's commercial airlines have split up into three global alliances, each of which includes a major U.S. carrier, a major European carrier and a presence at Narita. Star has

United

(UAUA)

Lufthansa

and

ANA

, which has a Narita hub. Oneworld has American,

British Airways

and JAL. SkyTeam has Delta,

Air France

and a hub at Narita, the single most important asset Delta gained from its 2008 acquisition of Northwest.

But now it seems that Delta, the world's largest airline, is not satisfied with Northwest's single-digit market share at Narita, which is smaller than either of the Japanese carriers' shares and also smaller than a few other Asian carriers' shares as well. Delta is talking to JAL about an investment, although it is unclear what strategic value might accrue to Delta as a result.

Whatever Delta is seeking, American and Oneworld cannot afford to be largely squeezed out of Narita. "American would have to go to the mat to prevent it," said aviation consultant Robert Mann.

American and JAL are not only Oneworld partners, but also have a code-share, enabling them to write tickets on one another's flights. Additionally, in 2007, American moved into a JAL terminal at Narita, enabling it to reduce connect times to many JAL flights, which is critical because JAL provides a key method to carry American passengers beyond Tokyo to points in Asia.

Currently, American offers five daily round trips to Tokyo, including two from Dallas and one each from Chicago, Los Angeles and New York. It also code shares with JAL on several flights from the same gateways. From Narita, JAL serves dozens of cities in Asia.

Northwest obtained rights to fly beyond Tokyo into Asia in 1947. Delta serves Narita from seven cities in North America, Honolulu, and 14 cities in Asia.

-- Written by Ted Reed in Charlotte, N.C.