American Air’s Oneworld Partners Craft Incentives for Japan Air

Nov. 14 (Bloomberg) -- American Airlines’ partners in Oneworld, the industry alliance that includes British Airways Plc, are devising incentives to help keep Japan Airlines Corp. in the group.

Each carrier is crafting its own offer, which will then be sent to Japan Air and the Japanese government as one proposal, Oneworld managing partner John McCulloch said in an interview yesterday. JAL, as the airline is known, is also awaiting approval of a government bailout.

“There is a concerted, coordinated effort by the Oneworld carriers to put together a package of incentives,” McCulloch said. “The package is very much an effort to persuade them to stay.”

The sweeteners would bolster efforts by American to ensure Japan Air stays in Oneworld as Delta Air Lines Inc. tries to lure the money-losing carrier to the SkyTeam alliance. American said this week that private-equity firm TPG Inc. was prepared to team up on a possible investment in Japan Air.

Oneworld’s proposal “is not specific to a capital infusion, although there is an element of that,” McCulloch said in a telephone interview from Vancouver. He didn’t give specifics.

Delta and American, the world’s two largest airlines, are vying for access to Tokyo-based Japan Air’s route network in its home country and in China, Asia’s biggest air-traffic market.

Taking a Stake

AMR Corp.’s American is the only Oneworld member proposing to pump money into Japan Air, which is seeking $1.4 billion in government loans to keep flying. American and TPG are studying a $300 million investment, a person familiar with the talks has said. Delta also has held talks with Japan Air about an investment, a person familiar with those discussions has said.

Staying in Oneworld would “make more sense,” and it would be “easy” to seek antitrust immunity to deepen ties with American, Japan Air President Haruka Nishimatsu said yesterday in Tokyo. The airlines established a marketing alliance in 1999, and JAL joined Oneworld two years ago.

That history may work in American’s favor when JAL makes a decision.

“It’s the most likely outcome that JAL would stay with Oneworld,” Jim Corridore, a Standard & Poor’s equity analyst in New York, said in an interview. “It would take a concerted and convincing effort by Delta to move JAL out of Oneworld.”

A spokeswoman for Atlanta-based Delta, Betsy Talton, declined to comment on Nishimatsu’s remarks.

AMR’s View

“A JAL decision to remain in Oneworld is key to JAL’s successful recovery plan,” said Charley Wilson, a spokesman for Fort Worth, Texas-based AMR. “It gives JAL greater ability to build a strong, competitive and successful business for the long term.”

AMR rose 9 cents, or 1.6 percent, to $5.82 yesterday in New York Stock Exchange composite trading, while Delta was unchanged at $7.80.

British Airways “and other Oneworld carriers are investigating ways we can offer” support to JAL, said Cathy West, a spokeswoman for the London-based airline. Scott Mowrer, senior vice president for North America for Hong Kong-based Cathay Pacific Ltd., said he had no immediate comment.

Qantas Airways Ltd., Australia’s biggest airline, said Nov. 11 it may advise Japan Airlines on establishing a low-cost carrier as part of the lobbying effort. Qantas doesn’t plan a financial contribution, Chief Executive Officer Alan Joyce said.

The other Oneworld members are Finland’s Finnair Oyj, Hungary’s Malev Zrt., Chile’s Lan Airlines SA, Spain’s Iberia Lineas Aer de Espana, Grupo Mexicana de Aviacion SA and Royal Jordanian Airlines. British Airways and Iberia announced plans this week for a merger.