Delta Offers $1B For Japan Airlines To Switch Sides

TOKYO (AP) -- Delta Air Lines and its alliance partners said Wednesday that they were making a $1 billion offer to lure money-losing Japan Airlines from its affiliation with American Airlines.

Delta is "by far the strongest partner for Japan Airlines," Delta President Edward Bastian told reporters here.

The offer escalates a tug of war between Delta and American for a minority stake in Japan's flagship airline, which both U.S. carriers see as a greater entryway into expanding in Asia.

JAL is particularly attractive to both airlines and their partners because of its extensive routes in Japan and China.

The offer from Delta and the SkyTeam alliance includes a $500 million capital investment, $300 million in short-term revenue guarantees and $200 million in asset-backed financing for the airline, known as JAL.

SkyTeam also would cover the cost for JAL to transfer from American's Oneworld alliance, estimated by Delta to total $20 million.

By partnering with JAL since the mid-1990s, American has been able to sell those routes to its own customers and share in the revenue. American and JAL offer reciprocal frequent-flier privileges to each other's passengers.

But JAL is struggling, and the Tokyo-based airline desperately needs an injection of capital and government help to avoid collapse. It has booked $1.5 billion in losses for the first half of the current fiscal year.

American Airlines in a statement reiterated its commitment to JAL, saying that sticking with Oneworld would be its best path toward recovery and future growth.