* Says tie with U.S. carrier hinges on "open skies" headway
* Air France-KLM also in talks on JAL alliance - source
* Rivals eyeing JAL's China, Asia routes
* JAL to cut 6,800 jobs, or 13 pct of workforce
* JAL shares down 3.4 pct after Monday surge, Nikkei flat
(Recasts, adds JAL CEO comments, background)
By Nobuhiro Kubo
TOKYO, Sept 15 Japan Airlines Corp 9205.T is
likely to opt for a tie-up with Delta Air Lines Inc (DAL.N) or
AMR Corp's AMR.N American Airlines, among rivals seeking to
invest in the loss-making carrier, if Japan and the United
States can reach an "open skies" agreement.
The U.S. airlines, and others including Europe's Air
France-KLM (AIRF.PA), are chasing a stake in Asia's biggest
carrier by revenue to help them grow in China and get access to
JAL's other Asian routes via code-sharing agreements.
The talks came as the cash-starved industry received another
reminder of the damage recession is inflicting on its finances.
The International Air Transport Association raised its
forecast for 2009 industry losses by $2 billion to $11 billion
as weak passenger and cargo traffic hits revenue. [nWBT013153]
Still, some airlines have already reported signs that a
slump in passenger and cargo traffic is beginning to correct
itself, feeding hopes of economic recovery later this year and
sparking a rebound in shares of carriers such as Air France-KLM.
The Franco-Dutch carrier's shares rose more than 2 percent
on Tuesday before shaving gains slightly on the IATA report.
Shares in Delta and American parent AMR rose early about 5
percent. JAL shares in Tokyo fell 3.4 percent in a flat market.
Airlines have been severely damaged by the recent economic
crisis and volatile oil prices, coupled to a lesser extent with
health fears over swine flu, and those that can afford it are
striking deals to lay claim to future sources of traffic growth.
"This would be a strategic investment and only a minority
stake, but it does bring some recognition that the biggest area
of growth going forward will be Asia," said Stephen Furlong,
aviation analyst at Davy Securities in Dublin, of the JAL talks.
One source, not authorised to discuss the talks publicly,
said the carriers were each discussing investing $200-300
million in JAL for a minority stake and a code-sharing deal.
Asked if JAL would choose either Delta or American as a
partner, CEO Haruka Nishimatsu told reporters on Tuesday: "Yes,
I think so, if an open skies agreement looks likely."
That would echo a recent liberalisation move between the
United States and Europe and allow closer cooperation on flight
scheduling and profit-sharing among U.S. and Japanese airlines.
Air France-KLM (AIRF.PA), formed from a Franco-Dutch merger
in 2004, is also in talks to invest in JAL, said the source who
was familiar with the matter. Air France-KLM declined comment.
Kyodo news agency said Korean Air (003490.KS) was also in
talks with JAL.
Investing in JAL would bring access to Haneda, the world's
third-busiest airport by passenger numbers.
Both Haneda and Tokyo's Narita international airport are
expanding, adding international flights and airline slots.
The decision by JAL, which is undergoing a state-supervised
restructuring after years of losses, could reshape the alliances
that dominate the global airline industry. The company said it
hoped to wrap up the capital tie-up talks by mid-October.
If JAL opts for investment from Delta or Air France-KLM, it
would be defecting from the Oneworld Alliance, a move analysts
say would deal a huge blow to a group that includes British
Airways BAY.L, Cathay Pacific (0293.HK) and American.
OneWorld would lose JAL's more than 400 flight slots a week
at Narita, twice those of Japan's No.2 carrier All Nippon
Airways (ANA) (9202.T), as well JAL's growing business in China.
ANA is in the Star Alliance, with Air China Ltd (601111.SS),
Singapore Airlines (SIAL.SI), Lufthansa (LHAG.DE) and others.
"Losing JAL would mean OneWorld suddenly has to rely more on
American Airlines' few slots in and out of Narita," said Nomura
analyst Makoto Murayama. "American (AMR) in particular would be
harmed, and is likely to fight that at all costs."
American Airlines, which is seeking U.S. approval by next
month to form a transatlantic alliance with BA and Spain's
Iberia IBLA.MC, is the No.4 international carrier at Narita,
with about 70 slots a week. Northwest Airlines, acquired by
Delta last year, is the leading foreign airline at Narita.
Analysts said JAL would have to weigh the advantage of
teaming up with Delta, the world's biggest airline, against the
significant cost of leaving OneWorld.
"If you just look at what the companies can offer, then
Delta would make more sense as an ally because it has more
services between Japan and North America," Credit Suisse analyst
Osuke Itazaki said, adding that a tie-up with Air France-KLM
would not expand JAL's network by much.
For related graphic, click: r.reuters.com/tup66d
Delta and Air France-KLM are members of SkyTeam, with Korean
Air (003490.KS) and Russia's Aeroflot (AFLT.MM). JAL has a
separate flight incentive partnership with Air France-KLM.
BIG JOB CUTS
JAL prefers American Airlines because of the Oneworld
alliance, the source said, but the Japanese government prefers
the financially healthier Delta or Air France-KLM.
JAL lost about $1 billion last quarter and is under growing
pressure to raise money and slash costs after securing a 100
billion yen ($1.1 billion) government-backed credit line.
The airline has forecast a net loss of 63 billion yen ($693
million) for the year to end-March.
For related graphic, click: r.reuters.com/hak66d
At end-March JAL had total liabilities of 1.44 trillion yen,
with the Development Bank of Japan its biggest long-term lender.
As it looks to cut operating costs 30 percent, CEO
Nishimatsu said JAL faced its "largest-ever downsizing" through
2011, with plans to cut 6,800 jobs, or 13 percent of its staff.
The carrier will also cut its overseas routes to below half
its total flights, Transport Ministry official Yasuhiro
Shinohara told reporters.
(Additional reporting by Mariko Katsumura and in TOKYO and Jui
Chakravorty in New York, John Crawlery in Washington, Tim Hepher
in Paris, writing by Mayumi Negishi, Editing by Ian Geoghegan)
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