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September 14, 2009

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American Airlines may buy JAL stake

AMERICAN Airlines is in talks to take a minority stake in Japan Airlines and form a joint venture with the struggling airline, a source said, pitting it against a rival bid from Delta Airlines.

JAL, Asia's largest airline by revenues, lost about US$1 billion last quarter and has been seeking investors to prop up its finances for a state-supervised overhaul likely to include heavy job cuts, a reduction in routes and asset sales.

American Airlines, a unit of AMR Corp, has held talks with JAL over several weeks on forming a joint venture under which the two would share revenues on flights and offer business customers joint contracts, the source said.

The source, who has direct knowledge of the talks, spoke on condition of anonymity because the negotiations are not public.

JAL is also weighing an offer from Delta, a source told Reuters last week. According to Japanese media, Delta would inject up to 50 billion yen (US$551 million) into JAL and wants a tie-up that would include code-sharing on international flights.

The proposed venture between American and JAL hinges on the enactment of an "open skies" agreement now being discussed by the Japanese and United States governments that would allow for close cooperation on flight scheduling and sharing of profit.

"I'm not talking about hugs and kisses. I'm talking about economic value to Japan Airlines," the source said. "What we've been talking about is actually expanding the relationship not just maintaining it."

JAL and American Airlines have had a code-sharing agreement for a decade and are both members of the Oneworld alliance, which pools frequent flyer incentive schemes. Other Oneworld members are British Airways and Cathay Pacific Airways.

A JAL spokeswoman declined to comment on specific talks with other airlines, including media reports that Air France-KLM may also look to invest in JAL.

"We are looking at a wide variety of measures, and that may include tie-ups with airlines," JAL's Sze Hunn Yap said.

American Airlines is keen to prevent JAL from forming a tie with Delta, which became the world's largest carrier when it bought Northwest Airlines last year and could use JAL to increase its international footprint.

Delta operates a hub at Narita airport but is without a Japanese partner.


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