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Thursday, Dec. 17, 2009

Investment, open skies make oneworld JAL's home: Arpey


Staff writer

American Airlines Inc. President and CEO Gerard Arpey said Wednesday that Japan Airlines Corp. should remain in their alliance instead of teaming up with Delta Air Lines Inc., adding his group may invest in JAL more than the already proposed $1.1 billion.

"We have offered JAL a total value proposition that is superior in every way to the alternative," Arpey told a news conference in Tokyo. He said the proposal is better and more realistic.

American Airlines and other members of the oneworld group, as well as private-equity fund TPG Inc., are jointly offering a $1.1 billion investment in JAL, while Delta and other members of Sky Team alliance are offering a $1.02 billion financial package, including an investment of $500 million.

Financially struggling JAL has been negotiating a partnership with both American Airlines and Delta.

JAL currently belongs to the oneworld alliance, which also includes American Airlines and British Airways.

Arpey noted that the group's investment is worth more than twice what Sky Team is offering to pay JAL and also pointed out a JAL-Delta partnership is not realistic, considering the open skies agreement forged between Japan and the U.S. last week.

The open skies pact will remove government limits on flights between the two nations and let the two countries' air carriers have more freedom in their operations.

Under the open skies deal, acquiring antitrust immunity, which would let carriers act more like a single company, is considered crucial.

Arpey said the JAL-American Airlines team, which does not have overlapping flights, will readily receive antitrust immunity. However, there would be "zero possibility" of a JAL-Delta team receiving approval, as the two carriers have more than a combined 60 percent share in U.S.-Japan flights, he said.

Oneworld and TPG offer "far more commercial and financial benefits, far less risk and the best chance for JAL to achieve long-term success," said Arpey, adding American Airlines will take all possible actions to prevent a JAL-Delta tieup.

According to American Airlines, JAL has earned about $500 million in annual sales through the oneworld alliance.



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