Battle for JAL: American Airlines ups the ante to $1.1 billion

American Airlines Inc, one of the world's largest carriers and a leading member of oneworld alliance said yesterday that it is prepared to invest $1.1 billion in the struggling Japanese carrier Japan Airlines Corporation (JAL), along with its partner TPG, a Texas-based global private equity firm. 

The move surpasses the $1 billion offer by rival Delta Airlines Inc and SkyTeam alliance members. Both American Airlines and Delta are targeting JAL to spread their wings in the region, the fastest growing airline market in the world.

Gerard Arpey, oneworld chairman and American Airlines' chairman and CEO said, "The oneworld alliance already has a significant investment in the success of JAL, and we are prepared to do even more to ensure that American, oneworld and JAL have a successful partnership for the long-term. We believe this in turn will allow JAL to produce significant benefits for all of its stakeholders.''

Nevertheless, observers believe that a final solution regarding restructuring of the ailing JAL is still months away. Japan's Enterprise Turnaround Initiative Corporation is expected to make a decision by the end of January whether it would lead JAL's restructuring.

JAL is planning to approach its pensioners for a 30-per cent cut in their benefits and if it doesn't work out, the government is proposing a law to reduce JAL's pension obligations. 

Tokyo-based JAL, once an imperious flag carrier, has now over one trillion yen ($11.3 billion) in liabilities and has reported continuously four quarterly losses. The company is seeking $1.4 billion aid from the Development Bank of Japan and other financial institutions, while trying to delay its loan repayments.