If Japan Airlines restructures without investments from Delta Air Lines or American Airlines, industry observers say that may be better for the both Japanese carrier's stability and the U.S. carriers' finances.
Delta said Monday it still intends to pursue a partnership with JAL to expand its Asian network, a day after reports emerged that the Japanese carrier will decline a cash offer from either Delta or American for a stake in its operations.
"As we have said from the beginning, the primary goal for Delta is building a long-term strategic alliance with Japan Airlines, benefiting both airlines tremendously," said Delta spokesman Trebor Banstetter in a written statement. "Delta stands ready to back this partnership with financial assistance, but for us this isn't a necessary component of an agreement."
JAL is already an American partner in the Oneworld global alliance. But with JAL in financial straits, Delta wants to lure JAL into its SkyTeam alliance with a $1 billion proposal. American Airlines recently upped its offer to $1.4 billion. Delta president Ed Bastian and other executives have been in Tokyo for discussions on a partnership.
The backdrop seemed to change over the weekend. News reports in Japan said JAL may soon file for bankruptcy, and that a state-backed turnaround body will decline cash from Delta and American and choose one as a partner later. Other reports said U.S. airlines' investments might be invited after new JAL management is put in place.
"Unless you have a survivable JAL without the benefit of investment by partners, you really aren't going to have solved the problem," said airline consultant Bob Mann.
Fellow consultant Darryl Jenkins said it may be "a Japanese pride thing ....It’s like, ‘We don’t need you to restructure our company. We can correct our own mistakes.'"
Marketing alliances involve the sale of seats on partner airlines' flights and reciprocal frequent flier benefits aimed at keeping business fliers loyal to the partner airlines. Delta wants a partnership with JAL to gain greater benefits from the Tokyo hub it acquired through its merger with Northwest Airlines.
"If they can get that without having to put any money on the table, this is a win-win situation all around," said Ron Kuhlmann, an aviation analyst at the Center for Asia Pacific Aviation. "But exactly what they are going to get is very unclear."
However, JAL's restructuring could mean big changes in its route network.
"The view from afar of the possible benefits is great," Kuhlmann said. "The reality is that there are enormous hurdles to be overcome to actually see those benefits."
Because Delta may not have gained much control in exchange for the small share of JAL its investment would have bought, "this idea that they would not have to put any money on the table doesn't change the influence very much, but gets them off the hook for paying cash," Kuhlmann said.
Removing cash investments from the equation may mean JAL will focus more on the two U.S. carriers' route systems in making a decision about a partner.
While American has an advantage as the incumbent partner of JAL, Delta as the world's largest carrier and its SkyTeam alliance "are in a very strong position to be competitive," Mann said. "Each of the partners brings unique attributes." SkyTeam also includes Air France, KLM and Korean Air, among others.
Kuhlmann said JAL's fluid situation makes it hard to handicap the competition.
"There are too many variables up in the air," Kuhlmann said. "I wouldn't put a lot of credibility in anything until it happens."
"When you look at how many people are banging their heads against the wall to get something that may be nothing, it shows you something about the industry overall," Kuhlmann said. "The whole [airline] industry is in some kind of disarray and the U.S. industry is the most disarrayed....They are trying to figure out where their place is in this world. And they're just trying everything."
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