Tokyo - Shares of Japan Airlines surged on Monday amid speculation that American Airlines and Delta Air Lines are vying to buy stakes in the money-losing carrier.
Under a major restructuring plan, the airline known as JAL, is looking to raise ¥250bn ($2.8bn) from banks, investment funds and airlines including Delta, according to the Nikkei financial daily.
Japan's largest airline said in a statement on 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.
JAL stock soared almost 8% to ¥176 on the Tokyo Stock Exchange, beating a sharp slump in the overall market. The Nikkei 225 stock average tumbled 2.3% to 10 202.06 as the dollar fell to a seven-month low against the yen.
Hit by plummeting demand amid a slumping global economy and swine flu fears, JAL incurred its biggest-ever quarterly net loss of ¥99bn ($1bn) in the three months to June.
Delta is in preliminary discussions about buying a stake in JAL for about $300m. The US airline giant could become a leading shareholder in JAL and get coveted access to Haneda Airport, close to Tokyo's business district, according to a person briefed on the Delta situation.
The Nikkei said Delta has offered to invest as much as ¥50bn ($550m), which would give it a 11.2% stake in JAL.
Delta's rival American Airlines is also negotiating a possible investment, according to a person familiar with the talks. American would like to form a joint business venture with JAL, in which the two carriers would seek antitrust immunity to work closely in setting schedules and prices for service around the world, according to the person, who spoke over the weekend on condition of anonymity because of the sensitive nature of the talks.
Splitting the revenue
American and JAL already have a so-called code-sharing agreement in which they sell seats on each other's flights. If they won immunity from antitrust laws, they could cooperate in setting prices and schedules. For example, instead of each operating a Chicago-to-Tokyo flight around the same time, they could stagger the flights to maximize traffic while splitting the revenue.
Delta doesn't have a Japanese partner. A Delta-JAL hookup would raise doubts about JAL's ability to remain in oneworld, an alliance of airlines that includes American and British Airways. Delta is in another alliance, called SkyTeam, which also includes Air France-KLM.
JAL is also reportedly in talks with Air France-KLM over a capital tie-up, Japan's top-selling newspaper the Yomiuri, reported this weekend.
The discussions could turn into a battle between Delta and American, said Osuke Itazaki, an analyst at Credit Suisse in Tokyo.
"If a tug-of-war develops between the two American airlines, it is likely to be positive for JAL's shares by raising their potential value," he said in a note to clients. "It would also have practical advantages in terms of fund raising and enlarging the scope for efficiency improvements at JAL."
JAL has forecast a net loss of ¥63bn for the fiscal year to March 2010, and plans to cut the number of flights and slash costs by ¥53bn during the current fiscal year and another ¥100bn in the next fiscal year.
The Nikkei said JAL would cut 4 700 jobs equal to about 10% of its group work force under the restructuring plan. The airline will also sell subsidiaries and assets to raise capital.
- AP