American, BA, Qantas in drive to bolster JAL

By Nathan Layne and Nobuhiro Kubo

TOKYO (Reuters) - American Airlines will team up with British Airways and Qantas Airways to bolster cash-strapped Japan Airlines, two sources said, aiming to fight off a rival offer from Delta Air Lines.

The proposal, which will include a capital injection from American Airlines but may not bring money from either BA or Australia's Qantas, comes as Delta holds separate talks to invest in JAL and woo it to a rival airline alliance.

JAL, which faces its second straight loss this business year, is weighing both offers as part of a larger restructuring expected to include layoffs, route reductions and asset sales.

Both Delta and AMR Corp's American are courting JAL to gain access to promising routes in Asia, including in Japan where Tokyo's Haneda airport is undergoing a major expansion.

Speaking to Reuters in Dublin, Qantas Chief Executive Alan Joyce said it was looking at all options to keep JAL as a partner, but said it was too early to talk about investments.

"Delta made a bid for JAL and the Oneworld Alliance is actually looking at JAL as a very important partner and we're looking at all of our options," he said.

Shares of JAL rose 2.4 percent, bucking a weaker market.

Executives from JAL's Oneworld airline alliance partners American, BA and Qantas met JAL executives this week in Tokyo and told them of their plans to put together a joint offer, two people with direct knowledge of the matter said.

The American-led group will try to sell JAL on the idea that leaving Oneworld, which pools frequent flyer miles, integrates computer systems and feeds passengers between member airlines, would trigger a big loss of business for JAL.

"A tie-up with Delta would give JAL a bigger benefit when it comes to North American routes," said Ryouta Himeno, transport analyst at Mitsubishi UFJ Securities.

"But by involving other carriers which are strong in other areas, American could have a good chance to keep JAL in Oneworld and expand its reach in Asia."

Delta is in the rival SkyTeam alliance, which has no major Japanese carrier. Fellow SkyTeam member Air France-KLM has been named as a potential partner with Delta for an investment in JAL. Japan's No. 2 airline, All Nippon Airways Co, is part of Star Alliance, the third major grouping.

"Combined, the Oneworld partnership today generates over half a billion dollars for JAL in revenues on an annual basis. JAL is very aware of this number," said one of the sources, who spoke on condition of anonymity since the talks are not public.

A BA spokesman said it was attempting to persuade JAL to remain part of Oneworld rather than team up with Delta.

JAL, American and Air France-KLM have declined comment.