Delta Says SkyTeam Willing to Invest More Than $1 Billion in JAL

NOVEMBER 23, 2009

By MARIKO SANCHANTA and MIKE ESTERL

The chief executive of Delta Air Lines Inc. said the SkyTeam alliance of global carriers would be willing to invest more than its proposed $1.02 billion into struggling Japan Airlines Corp. as it tries to forge a trans-Pacific partnership.

The final proposed investment into JAL by the nine-airline SkyTeam alliance could be "greater than what we've stated" thus far, Richard Anderson said in an interview Friday.

"When you get that value, it can be financeable. You create a lot more value, and together parties can figure out how to monetize that value," Mr. Anderson said.

Atlanta-based Delta and its SkyTeam partners are trying to persuade the Japanese carrier to defect from the rival Oneworld alliance of airlines to expand their share of the lucrative travel markets in Japan and Asia.

AMR Corp.'s American Airlines, a member of Oneworld, has said it and private-equity partner TPG also are willing to inject an undisclosed amount of money into JAL, which is undergoing a restructuring after several quarters of losses.

Delta, the world's largest carrier by traffic, said this week it was prepared to inject $500 million into JAL from SkyTeam in addition to a $300 million revenue guarantee, $200 million in asset-backed funding and $20 million or more in transition costs if JAL agrees to switch to SkyTeam.

"This is the first top-line revenue opportunity that has been presented to JAL," Mr. Anderson said.

The restructuring of JAL is seen as the first big test of the new Japanese government's willingness to take a hard line with "zombie" companies weighed down by billions of dollars in debt. Since the Democratic Party of Japan took power two months ago, it has focused on restructuring JAL, which is bogged down by over one trillion yen ($11.24 billion) in net debt and legacy pension costs.

Both Delta and American see this move as an opportunity to invest in JAL, a former flag carrier that has long been protected by the state and known for its proud and insular culture.

Mr. Anderson said that neither Delta nor its SkyTeam partners are interested in a board seat or management representation at JAL. "We don't need to manage anybody. We don't want to and don't expect to,'' he said.

The Delta CEO said SkyTeam was unlikely to link up with a private-equity group as it tries to woo JAL. "We have had many inquiries from other third parties that would be interested," said Mr. Anderson. Nonetheless, he added, "we're focused on a SkyTeam strategic investment."

The Enterprise Turnaround Initiative Corp, the government-led body that is leading JAL's rehabilitation efforts, is expected to complete its due diligence on the carrier in January.

Mr. Anderson said Friday that Delta would be willing to step in to aid JAL even before this process in finished. "We are ready, willing and able to participate at the right time," he added.

Write to Mariko Sanchanta at mariko.sanchanta@wsj.com and Mike Esterl at mike.esterl@wsj.com

Printed in The Wall Street Journal, page A29

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