Oneworld advantage saves JAL-American Airlines partnership

10 Feb 2010

After weeks of speculation, rumours and false trails, Japan Airlines (JAL) has finally confirmed that it will maintain its alliance with American Airlines (AA) and stay with the oneworld family.

Only last week, it appeared that the troubled Japanese flag carrier would opt for an alternative link with AA rival Delta, which was judged to be more lucrative in the longer term, but JAL has opted for the greater and more immediate networking opportunities afforded by the Oneworld alliance.

Airline alliances were a key reason for staying with AA said JAL vice-president Daiji Nagai: “We had a fierce debate over whether we should choose Delta and Skyteam for future profitability or stay in Oneworld and avoid incurring a loss from making a switch this year. Our conclusion was that we have to survive this year and the next year at all costs. There is no ‘after three years’ unless we stay focused on the restructuring programme in front of us.”

The airline faces a painful restructuring that will involve fewer JAL operated routes and frequencies and a greater reliance on codeshares and other partner benefits, such as lounge access and frequent flyer programmes, for its premium passengers. Remaining within the oneworld alliance minimises disruption and costs, at least in the short term.

Gerard Arpey, AA’s chairman and CEO, said the partnership would offer JAL “superior network presence in the markets that matter most. For example, for connections from Japan to the top markets within the Americas, Europe, Asia and Australia, in 16 of those 20 markets, oneworld provides JAL with a stronger network presence than any other alliance.”

Initially, speculation had focused on cash injections in excess of US$1billion offered by both Delta and its Skyteam partners and in turn by AA and its Oneworld partners to heavily indebted JAL. However, the Japanese government unexpectedly announced that JAL could file for bankruptcy avoiding the need for foreign investment.

Many analysts had suggested the Delta would have made a better partner. As a result of Delta’s merger with Northwest Airlines in 2008, it gained Tokyo’s Narita International Airports as a major hub into Asia. Delta flies to Japan from ten US cities, while AA flies from just four; New York, Chicago, Los Angeles and Dallas. However, it was feared that a JAL-Delta tie-up might provoke an anti-trust action that would delay or complicate the restructuring process.

Oneworld includes airline heavyweights such as Cathay Pacific, Qantas and British Airways, as opposed to Delta’s Skyteam, which includes Air France, KLM, Korean Air and Alitalia among others.

JAL is also facing fierce competition on its Japanese and international routes from its domestic rival All-Nippon Airlines (ANA). ANA is a member of the third aviation network the Star Alliance, which includes major airlines such as Singapore Airlines, Lufthansa, Continental, SAS and Thai Airways International.

JAL and AA are in the process of applying to the US department of transport for anti-trust immunity to allow the deal to be completed.

Kenny Coyle

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