American and Delta Fight Strategic Battle Over Japan Air Lines

Japan Air Lines (JAL) is an airline in trouble. It’s losing money faster than a rookie NFL player who just got his first payday, and it needs help. Now, Delta and American apparently have decided to battle over the airline because of its strategic importance.

You oneworld loyalists out there know that Japan Air Lines is a valuable partner over the North Pacific. Southeast Asia is well-covered by Cathay Pacific, but JAL provides an important link in the north between American, Delta, Air France Pursue JALthe US and Japan, and possibly more importantly, China. JAL holds a ton of slots at Tokyo’s Narita and Haneda airports, and those are scarce at desirable flight times. JAL is a natural fit for the alliance.

So when reports started surfacing last week that Delta was looking at pouring money into the bottomless sinkhole that is JAL, a lot of people were scratching their heads. I didn’t – this makes a lot of sense.

Remember, Delta inherited its Tokyo hub from Northwest, and it actually has a decent intra-Asian operation from Tokyo – a legacy from the end of World War II. As they say, to the winner go the spoils. There’s even a subfleet of narrowbodies based in Tokyo to fly some these routes.

My guess is that these routes absolutely suck wind right now. If Delta is really losing a ton of money as I suspect, they could eliminate all those routes and either use the slots to fly to the US or transfer them to JAL. The additional connectivity in Tokyo that they could gain from this link-up would add a bunch more traffic to feed all that US-Tokyo flying Delta does now. (You people in Portland could breathe a sigh of relief, because this could probably help that flight come off the edge of the cliff.)

This move could make a big, immediate difference on the bottom line. If Delta can pour some money in but get it back out very quickly in the form of improved profits, then it’s a no-brainer. Everyone in SkyTeam wins . . . except for Korean. Poor Korean would be demoted to second place in the North Pacific, and it would likely very seriously look at defecting to oneworld where it could take JAL’s place as top dog in the region (or only dog, as the case may be).

Of course, if JAL leaves, oneworld loses, so American has now come back with its plan to invest in JAL. American is pitching it as a strengthening of its partnership that has been in place for years. The airline would set up a joint venture similar to what we’ve seen over the Atlantic with the likes of United and Lufthansa, KLM and Northwest, etc. In other words, they’d split the revenues on flights between the US and Japan.

All this info is coming from magical “sources” and nothing has been confirmed, so we don’t really know any details about what’s being proposed here. There are also rumors that Air France/KLM is in the running, and that would be good news for Delta. Air France and JAL have actually had a legacy codeshare and frequent flier partnership that crosses alliance boundaries. It has strengthened in recent years, so this would add some more credibility to the Delta bid.

This is all pretty interesting to watch. It’s clear that JAL needs some cash, so it’s in a good place to pick the suitor that’s offering the best deal. It’s nice to be wanted.

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