TOKYO (AP) — American Airlines, along with its alliance partners, has boosted its offer of support to Japan Airlines to keep the money-losing airline with the oneworld family.
American, British, Airways, Qantas Airways and Cathay Pacific Airways said Tuesday they are ready to inject $1.4 billion cash into Japan’s flagship carrier, up from $1.1 billion. In addition, they will guarantee $2 billion in revenue over the next three years if JAL stays in the oneworld alliance.
Sources familiar with talks between the carriers said American made the new cash offer to JAL last week.
The announcements by JAL’s oneworld partners came as the Japanese government finalizes the details of a turnaround plan for the country’s flagship carrier, which is deeply in debt and suffering heavy losses. The plan will include a bankruptcy filing, cutting about a third of its work force and canceling almost $4 billion in debt, according to media reports.
JAL is still Asia’s biggest airline and its access to the region is a prized asset for other airlines. Executives from oneworld alliance members American, British Airways, Qantas Airways, and Cathay Pacific Airways told reporters at a press conference Tuesday in Tokyo that their plan would help the Japanese carrier through its recovery.
“It bring 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,” said Thomas W. Horton, chief financial officer for American’s parent AMR Corp.
Rival Delta Air Lines and its SkyTeam partners have offered $1 billion, including $500 million in cash. However, a government turnaround body is set to decline all cash offers, as it fears giving foreign carriers a stake in JAL would complicate the restructuring, according to media reports.
“While JAL and the Japanese government might decide to address capital requirements internally — and we certainly would understand and respect that — our offer of capital would be available if this was deemed an appropriate resource to aid in the restructuring of JAL,” Horton said.
If the government taps the American group for cash, private equity firm TPG will commit as much as $1.1 billion with the rest coming from oneworld.
Earlier Tuesday, Transport Minister Seiji Maehara held talks with the heads of JAL’s three main banks. Public broadcaster NHK said Maehara explained JAL’s bankruptcy plan to the banks.
During the meeting, the banks — Mizuho Corporate Bank Ltd., the Bank of Tokyo-Mitsubishi UFJ Ltd., and Sumitomo Mitsui Banking Corp. — approved the airline’s bankruptcy, Kyodo News agency reported.
Officials at the transport ministry and the three banks declined to comment on the reports.
JAL’s shares have sank in recent days, with trading paralyzed on Tuesday due to a glut of sell orders amid bankruptcy fears. JAL’s shares are likely to be delisted following a bankruptcy filing, the major daily Asahi said Monday.
Since trading began Tuesday, JAL was flooded with sell orders, with its price indicating at 37 yen, down a staggering 44.8 percent from Friday’s close of 67 yen. Japan’s financial markets were closed Monday for a public holiday.
JAL will also slash about 15,600 jobs — 33 percent of its group work force — under a restructuring plan being hammered out by a state-backed corporate turnaround body, Kyodo News agency has said.
The Enterprise Turnaround Initiative Corp. of Japan, which is responsible for JAL’s restructuring, will ask banks to forgive 350 billion yen ($3.8 billion) of debt owed by the airline, the Nikkei said during the weekend.
