JAL- Ugent talks to avoid Bankruptcy

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  • Hess963
    Participant

    Hi everyone !!

    Recent update–Japans Transportminister Seiji Maehara excludes a possible dissolving of JAL as it still holds the view that in Japan two international airlines are still needed.

    And the more obvious and important aspect is losing the national airline means losing face.
    Just take the bankruptcy of Swissair and later the acquisition through Lufthansa German Airlines–I have some Swiss friends and they still say openly –Swissair’ s downfall was absolute a blow in Swiss’s pride and is still a trauma. It will take years to overcome the inner scars, if they are possible to heal at all.

    In order to reach the goal of keeping JAL–it has to slim and reorganise the cargo division as one of the priorities as this is one of the weakess and urgent sector to be monitored and improved.
    There will be definitely some allocations and cessations of domestic and international destinations which are not profitable or able to be continued as code shared destinations within the Oneworld alliance or other alliances.

    And the most cautious and delicate task is to cut jobs ( estimated around 6800 ) and those lucky enough to stay in the company will be forced to face the daunting revelation of facing restructuring plans which primarily impose a voluntarily reduction of their pensions.
    As this is in general one of the important issues and definitely hard to solve–see BA’s fight to get a solution with its union and employees.

    Even with the finacial and moral support of the Japanese government and fiscal institutes-JAL still needs fiscal boost . The negotiations with AA and Oneworld as well as Delta/NW and Skyteam are still undergoing. But one thing is sure–both US airlines will bear deficits if they get the bid–but the fact of acquiring JAL and getting a foot in the Japanese market as well as a huge share of the transpacific traffic–are inducements enough even if it means taking a vast amount of deficit and carry these for many years to come !!


    Hess963
    Participant

    Hi everyone!!

    Just an update about JAL–AA has raised its bid for JAL to 1.1 billion USD against DL/NW bid of 500 million USD in new equity and another 500 million USD in asset-backed financing and compensation.

    Both parties are desperately eager to get JAL as the new open skies treaty between Japan and the USA will be signed next year–both biders want to have a huge advantage and stronghold in Japan which sets a base for the East Asian market–especially targeted on China.

    On thing is sure JAL’s record losses of almost 1.5 billion USD sum up in the first half of this year is definitely frightening and a very bold burden for the future “boss” of JAL.


    Hess963
    Participant

    Hi everyone !!

    Latest roundups:
    The Japanese government provides further government aids for the gravely chipped Japan Airlines (JAL). According to media information the Japanese government prepares an auxiliary package in billions. State guarantees more than 700.0 billion yen should form the basis of a reorganization of the oneworld society. JAL had announced in november to implement an extensive measure program to the stabilization of the company and its performance.

    The airline wants to cut 6.800 jobs in the enterprise and begins this month with the removal of unprofitable connections from their network. On long distances: from december JALwill cancel the connection between Osaka and Hangzhou as well as the distances between Tokyo and Xiamen, Qingdao and Hangzhou. In january the routes will be ceased are Osaka – Busan, Hanoi and Kuala Lumpur via Singapore..

    Also in january JAL stop the flying operation from Tokyo to Mexico via Vancouver. The frequency in the Canadian west coast metropolis is reduced at the same time from seven to five connections. Moreover, on six international routes JAL will use smaller aircraft in the future

    As mentioned before AA/Oneworld and DL/Skyteam are having a huge showdown to whom JAL finally will be belonging to in the future.
    Particularly for American Airlines there is a lot at stake in Tokyo. The airline wants to prevent with their bid for a minority participation in JAL that Delta develops their international dominance furrther and grows stronger on the routes between North America and Japan. British Airways also wants to prevent an alliance change of JAL.

    Delta Air Line had already stated in september their intention to win JAL over on their side. Traffic interests might have been set back with this step opposite strategic considerations – the merger with Northwest Airlines in 2008 already gave own access to the strategically important NWA hub in Narita to Delta.

    American Airlines and Oneworld remain dependent on the other hand directly on an ally like JAL. They want to use Narita as a hub for Asia. Branch analysts see American Airlines and Oneworld, therefore under substantial constraint. A loss of JAL would endanger the position of the network in Asia lastingly.

    Members of SkyTeam and Star Alliance who is bound with All Nippon Airways or Northwest could wring from the Oneworld connected airline in Narita a huge share of the Asian market.

    American Airlines would see itself in the Asia traffic in a huge disadvantage – not only opposite Delta, but as well towards the other US competitors Continental Airlines and United Airlines (in each case star Alliance).

    JAL’s struggling only shows very well, in how huge the dependency of big international airlines in alliances nowadays. It is not only the matters of cost cuttings, managing the yields, harmonizing cost intensive sections..it is also about maintaining and strengthening ones’s stronghold …it will be more fiercely in the future. This means sole fighter airlines like EK which is on its own a good performer in the airline industry will definitely see and realize when the time is right to know in which alliance to be part of or miss the train for the worst.


    Airpocket
    Participant

    Hess, how do you know so much about the JAL rescue package? Do you have an inside connection within the airline or the Japanese government?;o)


    Hess963
    Participant

    Hi everyone !!

    new developments of JAL’s future: it is rumoured that JAL is more likely to take Delta/NW’s offer rather than AA’s. It is said that JAL’s management has already choosen Delta/NW, although AA has the more higher bid of $ 1,1 Billion comparing to $1,02 Billion of Delta/NW. This favouring of Delta is said to have come from a certain groupe of people in the Japanese government who are more keen to Delta than AA. But this development only make both parties consider to make a more better and higher bids than the recent ones. This biding should come to an end at January 16. when JAL management will give the decision which airline has won the race.

    This is really getting interesting ! Will AA and Oneworld really can bear the lost of JAL? Why is the Japanese government such more keen to Delta rather than AA? Does JAL really fit in DL/NW-Skyteam alliance?
    A lot of questions and really curious how those folks in Dallas and Waterside are thinking right now—is it too late for Oneworld?


    AMcWhirter
    Participant

    Hess asks:
    “Why is the Japanese government such more keen to Delta rather than AA? Does JAL really fit in DL/NW-Skyteam alliance? “

    Maybe it’s because the Japanese government has a soft spot for Northwest (now part of Delta). Northwest helped set up JAL in October 1951. The first JAL passenger flight was operated by a crew leased from Northwest.

    But if JAL were to join Skyteam then I can see conflict with fellow member Korean which operates a large hub at nearby Incheon airport at Seoul. Incheon rivals JAL’s hub at Tokyo Narita as a gateway to the region.


    StephenLondon
    Participant

    TOKYO, Jan 16 (Reuters) – Japan Airlines (JAL) (9205.T) has agreed on a tie-up with Delta Air Lines (DAL.N) that will mean JAL joins the SkyTeam airline alliance, dropping its membership of the Oneworld alliance, a Japanese newspaper said on Saturday.

    JAL and Delta agreed the deal in Tokyo on Friday, the Yomiuri newspaper said, and plan to complete the switch by April 2011.

    As JAL heads for bankruptcy, Delta and American Airlines (AMR.N) have been courting it with rival offers of financial aid, eager to gain access to routes to fast-growing Asian markets and to get a stronger foothold in Japan.

    Japan’s state-backed Enterprise Turnaround Initiative Corp of Japan (ETIC) has estimated that an alliance with Delta would give JAL an annual benefit of 17.2 billion yen, three times more than expanded ties with American would offer.

    Delta will continue to discuss with ETIC how much it will invest in JAL, the Yomiuri said. The two companies will apply to the U.S. government for anti-trust immunity by mid-February, the newspaper said.


    VintageKrug
    Participant

    Bloomberg disagrees with Reuters:

    http://www.bloomberg.com/apps/news?pid=20601087&sid=a.Qap0OPTLKc&pos=5

    miuri Newspaper reported today that the company and Delta Air Lines Inc. reached a basic agreement on a tie-up covering code-sharing services.

    A state-backed fund is set to decide on a turnaround plan for JAL on Jan. 19 after the carrier sought help reorganizing following three losses in four years. The program will probably include a bankruptcy filing, according to three people familiar with the situation, which may wipe out investors.

    Delta has offered a $1 billion package to lure Tokyo-based JAL into its grouping, while American and partner private-equity firm TPG have offered a $1.4 billion investment to safeguard access to flights in Japan and China. Both of the U.S. carriers have said that bankruptcy wouldn’t deter them.

    “We continue to be in discussions with JAL,” Betsy Talton, a Delta spokeswoman, said in an e-mail.

    Japanese Transport Minister Seiji Maehara has said he doesn’t expect a decision on JAL’s alliance partner this month.

    “We have no reason to believe this unsubstantiated and speculative report,” Charley Wilson, a spokesman for the AMR unit, said regarding the Yomiuri report.


    VintageKrug
    Participant

    And is seems Bloomberg was correct, as oneworld wins the day, for now at least:

    ————————-
    Comment from OneWorld: –

    oneworld News

    For immediate release: Latest news from the oneworld airline alliance:

    Business as usual for Japan Airlines
    19 January 2010

    Japan Airlines’ position in the oneworld® alliance is unaffected by the announcement today that the airline is to operate under Japanese Corporate Reorganisation proceedings.

    The state body overseeing its restructuring, the Enterprise Turnaround Initiative Corporation (ETIC), has confirmed also today its support to JAL, stressing that it is business as usual for the airline commercially and operationally during its restructuring.

    This includes its agreements and co-operation with partners. So the airline continues to offer full oneworld services and benefits, and tickets for flights on JAL and its frequent flyer arrangements are unaffected, with JAL reassuring its passengers that they will continue to receive the same high levels of service and safety.

    oneworld and its other member airlines have offered JAL all possible support through these difficult times and into the future.

    oneworld remains convinced that its proposals for JAL are vastly superior in every respect to any alliance alternative available to the airline – including commercial benefits totalling US$2 billion over three years. This would provide JAL, its employees and customers, and the government and taxpayers of Japan, with the greatest long-term value at the lowest risk, bringing stability and certainty to the airline at a time when it is most needed.

    For more details on the oneworld total value proposition to JAL, see http://www.oneworld.com/ow/news/details?objectID=20395

    For Japan Airlines’ message to customers today, see https://www.jal.co.jp/en/other/info2010_0119_2.html and for further JAL information, see http://www.jal.com

    For more news from oneworld, see http://www.oneworld.com/ow/news

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