American Airlines says TPG could invest in struggling JAL

By Nathan Layne and Nobuhiro Kubo

TOKYO (Reuters) - Private equity firm TPG could partner with American Airlines on a minority investment in Japan Airlines (9205.T) to prevent its defection to a rival airline group, the chief financial officer of American parent AMR Corp (AMR.N) said.

The emergence of TPG as a potential investor comes as the loss-making Japan Airlines seeks its fourth state bailout since 2001, saddled with $15 billion in debt, a massive pension deficit and dozens of unprofitable routes.

The Japanese government pledged on Tuesday to enlist a state bank to offer bridge loans to prevent the airline from running short of cash and said it may introduce legislation to cut a pension shortfall that hit $3.7 billion in March.

Even as it struggles to avoid bankruptcy, JAL is being wooed separately by American Airlines and Delta Air Lines, which are keen to gain access to JAL's network in Asia and a stronger foothold in Japan. JAL is Asia's largest carrier by revenues.

AMR's Thomas Horton said TPG, which helped fund Continental Airlines emergence from bankruptcy in 1993 and backed a failed takeover attempt for Australia's Qantas Airways (QAN.AX) in 2007, has agreed to potentially invest in JAL as part of any deal with American Airlines.

"As appropriate and if it were welcomed by Japan Airlines and the government of Japan, TPG could also be part of a comprehensive recovery plan," Horton told reporters in Tokyo.

"They have been active in the airline space over the years."

A spokesman for TPG in Tokyo declined to comment.

American partners JAL in the Oneworld alliance, which pools frequent flyer miles and feeds passengers between members, and is keen to block it from joining Delta in the rival SkyTeam group.

American has argued that JAL and Delta would have difficulty clearing regulatory hurdles if they sought antitrust immunity for closer business ties because the alliance would give SkyTeam control of 60 percent of air traffic between Japan and the U.S.

American, which has hired Rothschild ROT.UL as an adviser on the deal, also estimates that defecting to SkyTeam could drain JAL of about $500 million in revenues during a transition period of 18-24 months.

A Delta spokeswoman in Tokyo declined to comment.

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In addition to a capital investment, American has been talking with JAL on forming a joint venture to cooperate more closely on scheduling, pricing and marketing. American estimates this could bring another $100 million in annual revenue to JAL.

Such close cooperation requires an "open skies" agreement between Japan and the United States. The two governments are in negotiations and are aiming for a deal this year.