TOKYO: American Airlines escalated the bidding war for Japan Airlines to keep it from defecting to rival Delta’s alliance, even as the money-losing Japanese carrier moved closer to bankruptcy.
American, along with key airline partners, said Tuesday they are prepared to inject $1.4 billion cash into Japan’s flagship carrier, up from the previous offer of $1.1 billion. In addition, they will guarantee $2 billion in revenue over the next three years if Japan Airlines, or JAL, stays in the oneworld family.
“This proposal demonstrates oneworld’s extraordinary commitment to JAL,” said Tom Horton, American’s chief financial officer. “It brings stability and certainty to Japan Airlines at a time when it is most needed, as it faces turbulent times over the coming weeks and months.”
The announcement came as the Japanese government finalizes details of a turnaround plan for JAL, which is deeply in debt and suffering heavy losses. The plan will likely include a bankruptcy filing, cutting about a third of its work force and canceling almost $4 billion in debt, according to media reports.
Transport minister Seiji Maehara met Tuesday with JAL’s major creditor banks, including the Bank of Tokyo-Mitsubishi UFJ Ltd. and Sumitomo Mitsui Banking Corp., and said they intend to cooperate with the rehabilitation plan being hammered out by a state-backed corporate turnaround body.
He said the government is committed to keeping JAL flying as it restructures.
Meanwhile, JAL said it managed to convince two-thirds of its retirees to agree to major cuts in pension benefits, clearing a critical roadblock in qualifying for public aid.
The day’s developments convinced investors to unload JAL shares amid fears that the plan involves removing the issue from the Tokyo Stock Exchange. Prime Minister Yukio Hatoyama suggested Tuesday that delisting may be inevitable during restructuring, saying “shareholders have a certain responsibility.”