Global travel group opposes proposed Delta-JAL tie-up as eroding competition

Global travel group opposes Delta-JAL tie-up

TOKYO — A group representing business travelers is opposing the proposed tie up between Delta Air Lines and money-losing Japan Airlines as bad for competition.

Kevin Mitchell, chairman of the Business Travel Coalition, based in Brussels, said Thursday that the proposed SkyTeam alliance would likely create a monopoly, totaling 62 percent market share on routes between Japan and the U.S., up from a third.

The group representing 300 global corporations thinks Japan Airlines Corp. should remain in its alliance called oneworld with American Airlines, he said.

Mitchell also expressed doubts a Delta-JAL tie-up would clear U.S. antitrust regulations.

He said his group has sent a letter to Seiji Maehara, Japan’s transport minister, stating such views, and made a copy available to the media.

In the letter, the group noted the importance of Japan-U.S. air routes, with 6.3 million passengers a year, and warned a Delta-JAL tie-up would be too dominant.

“JAL remaining in the oneworld alliance with American Airlines is obviously best for competition and consumer choice,” the letter said.

Japan Airlines has suffered amid the global slowdown, competition from rival All Nippon Airways and a spate of safety lapses that tarnished its image.

It is weighing cash offers from Delta and American for partnerships, while it awaits details of a government-orchestrated bailout to be worked out, which is expected to involve massive job and pension benefit cuts.

Delta and its SkyTeam partners have offered $1 billion to JAL. American has countered with a $1.1 billion offer to JAL to remain its partner. Executives from both Delta and American have suggested they might boost their financial offers.

Delta has expressed confidence that if it forms an alliance with Japan Airlines the tie-up will get clearance from regulators. American has repeatedly challenged that assertion.

Japanese media reports have said JAL may be leaning toward Delta, but JAL and American have denied such reports.

Earlier this week, the state-owned Development Bank of Japan doubled its credit line for Japan Airlines to 200 billion yen ($2.2 billion), ensuring a cash infusion crucial to keeping the airline afloat.

In November, JAL reported a 131.2 billion yen ($1.5 billion) loss for the fiscal first half through September. It did not give a full year forecast, saying there were too many uncertain factors.

The Nikkei, Japan’s top business daily, reported Thursday the government restructuring body is estimating JAL’s losses for the fiscal year will balloon to 1.2 trillion yen ($13.3 billion), and a bailout will require hundreds of billions of yen in additional financing.

JAL shares closed at 76 yen (84 cents) in Tokyo, down 10 percent, losing much of the gains made earlier in the week on the Development Bank funding report.

(This version corrects an earlier version that said Cigna Corp. is a member of the Business Travel Coalition. Cigna is not a member. )