Delta offering JAL a life-line?





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Delta Air Lines is unlikely to take a majority stake in Japan Airlines if the ongoing talks, reported by various news organisations, come to fruition.

There is likely to be opposition from the Japanese government to such a move, especially since it has spent trillions of yen helping to prop up a carrier still seen as a national institution. A stake that does not give it a majority stake in JAL would be more palatable within Japan.

Regardless, the move would serve both JAL and Delta very well. JAL needs a cash infusion to keep it going and greater access to the US market, while Delta would gain from the opening up of Tokyo's Narita and Haneda airports.

JAL, in particular, needs to look into the possibility seriously as this could help to to refine its operations and compete more effectively against domestic rival All Nippon Airways.

They have to sort out various details, including JAL's oneworld alliance and Delta's SkyTeam alliance membership. There could also be opposition from other airlines, who might say that the tie-up is anti-competitive. But these are not insurmountable.

There is an added element to this issue - Delta's strategic plans. The carrier's management, buoyed by a strong cash balance, have obviously decided that trans-Pacific routes are a priority. Look at the airline's plans to form a joint venture with Virgin Blue in Australia.

This growth strategy would be a major challenge to the likes of American and United Airlines, as well as the carriers on this part of the world, on these highly lucrative routes. They are not likely to give up without a fight.

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