AA, BA, Qantas, And Cathay Pacific Suggest $2 Billion In
Commercial Benefits
American Airlines, along with fellow oneworld Alliance
founding members British Airways, Qantas Airways and Cathay Pacific
Airways, outlined $2 billion in commercial benefits to Japan
Airlines (JAL) over three years on Monday. oneworld says the
proposal would provide JAL the best path to future success while
minimizing risk for the Japanese government and taxpayers and
maximizing the benefits for air travelers.
The enhanced, broad-based commercial offer would serve as a key
component of a comprehensive, government-led restructuring plan for
JAL. As part of the proposal, JAL would remain a key partner in
oneworld, a collection of 11 airline industry companies.
The proposal also includes a pledge - if welcomed - to offer
JAL guidance and expertise from partners that have successfully
executed airline restructurings. "This proposal demonstrates
oneworld's extraordinary commitment to JAL. It brings stability and
certainty to Japan Airlines at a time when it is most needed, as it
faces turbulent times over the coming weeks and months," said Tom
Horton, American's Executive Vice President of Finance and Planning
and CFO. "We believe our proposal is in the best interests of JAL
and its employees and customers, and the government and taxpayers
of Japan. It provides JAL the greatest long-term value at the
lowest risk."
The first part of the broad-based offer would provide for
enhanced commercial relationships between JAL and American, British
Airways and Qantas. The three airlines' approximately $2 billion in
commitments and benefits would be realized by JAL over the three
years and includes $1.5 billion of continuation of the ongoing
revenue that JAL realizes from oneworld today, $300 million in
incremental revenue guarantees from American Airlines, and
approximately $200 million in enhancements from British Airways.
"We are pleased that two other founding members of oneworld,
British Airways and Qantas Airways, have joined us at American
Airlines to offer support through their commercial relationships
with JAL," Horton said.
American already has proposed to JAL that it apply for
anti-trust immunity (ATI) between the United States and Japan.
American says with its network and ability to quickly obtain ATI,
it is the best choice for JAL. With immunity and by participating
in a joint venture with American, JAL can realize a revenue benefit
that will bring it an estimated $100 million annually, American
says. As part of this enhanced offer, American is guaranteeing the
$100 million in new annual revenue for the first three years of the
proposed venture.
British Airways, the United Kingdom's largest carrier, has
proposed a series of enhancements to its business relationships
with JAL that will result in an approximate $200 million in new
revenue to JAL over three years. Among the most significant of the
initiatives is British Airways' offer to create a joint business
agreement with JAL so that, from April 2011 and subject to
regulatory approval, the two carriers can enjoy greater revenue
sharing opportunities that will offer real long-term value for
Japan Airlines. As part of a joint business venture, British
Airways will support and facilitate a new service between London
Heathrow and Tokyo's Haneda International Airport. "We are
committed to playing a full part in supporting the recovery of
Japan Airlines within the oneworld alliance," said Roger Maynard,
Director of Investments for British Airways. "London remains the
premier destination in Europe and needs to be central to JAL's
European plans."
Beginning April of this year, British Airways will more than
double the European points on which it code shares with JAL, which
will provide greater opportunities for seamless passenger travel.
"This change will provide more convenient connections and an
improved customer experience for Japan Airlines passengers arriving
at Heathrow and connecting to flights operated by British Airways,"
said Maynard.
Qantas Airways Monday has also reinforced its support for
Japan Airlines. Qantas Executive Commercial, Rob Gurney, said,
"Qantas has offered to share expertise in relation to its two-brand
and low-cost carrier business strategy. The Qantas Group's two
flying brands strategy has provided Qantas with unique strength in
terms of scale, network and customer reach and has enabled us to
meet the challenges of the global economic downturn. This model has
already proved successful for the Qantas Group on services between
Australia and Japan. Given our long-standing partnership with Japan
Airlines and the oneworld alliance, Qantas is committed to working
with Japan Airlines to ensure its long term viability and
success."
American says it is willing to provide JAL support and
cooperation in areas such as fleet planning, network analysis,
financial forecasting, revenue management, and maintenance
operations.
Since the 2003 launch of its own Turnaround Plan, American
Airlines has implemented cost-saving programs and structural
improvements in these areas that have saved the company
approximately $6 billion, which allowed American to face the
industry's many challenges, including many that JAL faces today.
TPG also has a history of success in the airline and travel
industries and is ready to offer its expertise to JAL if desired.
"Our proposal also brings another crucial value to JAL. And that is
the expertise of partners who can assist JAL, if invited, in a
complicated restructuring," Horton said.
The enhanced total value proposal is outlined in a letter from
oneworld to Seiji Maehara, Japan's Minister of Land,
Infrastructure, Transport and Tourism; Hiroshige Nishizawa,
President and Representative Director, Enterprise Turnaround
Initiative Corporation (ETIC) of Japan; and Hideo Seto, ETIC
Committee Chairman, Enterprise Turnaround Initiative Corporation of
Japan.
Additionally, if deemed appropriate and welcomed, American
Airlines/oneworld and the private investment firm TPG are prepared
to invest up to $1.4 billion as part of a comprehensive plan
supported by the relevant participants to return JAL to financial
vitality. This is a $300 million increase from their previous
proposal, and it would be available if this was deemed an
appropriate resource to aid in the restructuring of JAL.
Cathay Pacific Airways, with its Hong Kong hub, believes
keeping JAL as a member of the oneworld alliance is a key to
maintaining a strong presence in the strategically important and
fast-growing Asian marketplace. "The corporate business traveler
wants access to the world's most prestigious markets and JAL's
Tokyo hub and Haneda facilities are vitally important to link
flyers to the major business centers of Japan, Hong Kong and
Australia," said Simon Large, President of Cathay
Pacific-Japan.
"We believe the oneworld proposal will minimize burdens on
Japanese taxpayers, improve air travel services and competition,
and will allow Japan Airlines to prosper as a world-class global
airline for the long term," said American's Horton.