Monday, December 14, 2009

Japan and U.S. Agree Ppen Skies Deal

The race between American Airlines and Delta Air Lines to strike a partnership with Japan Airlines has taken on added importance following the completion of agreement between the US and Japan to liberalise air traffic.
The “open skies” deal will remove many of the legislative hurdles to operating flights between the US and Japan. This will also allow airlines from both countries to have a wider range of destinations and routes to choose from.
The agreement includes both passenger planes and cargo services.
However the Japanese government has warned that the US would first need to consider waiving certain antitrust rules before the agreement was formalised.
This would mean airlines which are in alliance with each other would be able to share scheduling and pricing, and effectively allowing them to operate as a single company in the US-Japan market.
US Transportation Secretary Ray Lahood said: “Once this agreement takes effect, American and Japanese consumers, airlines and economies will enjoy the benefits of competitive pricing and more convenient service.”
Star Alliance members, United Airlines and All Nippon Airways, said they would move swiftly to secure antitrust immunity following the open skies agreement.
This will increase pressure on American and Delta to strike a partnership with JAL.American and JAL are members of the OneWorld alliance, making them natural candidates for a partnership. But Delta, the world’s largest airline, is trying to lure JAL to join the SkyTeam alliance.
JAL lost more than Y130bn ($1.46bn) in the six months to September and is straining under more than Y1,400bn of interest-bearing debt.
Despite its financial problems, the airline is seen highly attractive for its strong links to China and other Asian destinations.
In November Delta and its SkyTeam partners offered to inject $500m in new equity into JAL and extend another $500m in asset-backed financing and compensation for the cost of switching alliances.
American responded by promising to invest up to $1.1bn alongside TPG, the US private equity group.

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