TPT January 2010

G lobal M arketplace

Transport Minister Seiji Maehara spoke on 29 October, the date on which Japan Airlines confirmed that it would apply for financial assistance from the Enterprise Turnaround Initiative Corporation (ETIC), and a month after the troubled carrier first said it would need state aid. The newly formed agency is empowered to buy the debt of Japanese companies in trouble, and has access to up to $17.7bn of government-guaranteed bailout funds. How much of this aid JAL requires, and how much it receives, will depend on the determinations of the ETIC specialists sent in to study its finances and restructuring plan, probably over the course of several months. These experts have their work cut out for them. JAL’s losses totalled $1.1bn in the April-June quarter of 2009 alone. Its debts are estimated at up to $15bn. While the ETIC does its spadework, other interested parties have ideas of their own as to the best course for JAL and the government that wants to save it. On 5 November, executives with the SkyTeam airline alliance were reported to have said they would like to welcome Japan Airlines to their group. Delta Air Lines, Alitalia, Air France-KLM, and Korean Air are all members of SkyTeam. Japan Airlines may of course elect to remain a member of the rival oneworld group, to which American Airlines, British Airways, and Qantas also belong. The biggest alliance, Star – whose members include United Air Lines, Lufthansa, and Singapore Airlines – has not weighed in; but it may be presumed to be ready and willing to help itself along with helping JAL. Something else that goes without saying is that, with every airline alliance a jumble of carriers’ flags, nationalist sentiment will not be a factor in the deliberations on JAL’s future. A possible boon for Delta The most interested observer of the rescue effort is almost certainly Atlanta-based Delta, for which the outcome could hold nearly as much significance as for JAL. The world’s largest airline by fleet size, Delta already has a presence in Japan by way of its acquisition in 2008 of Northwest Airlines. But its market share is much smaller than that of Japanese carriers. Delta and JAL had reached out to each other for some time before the ETIC announcement. On 12 September it was reported by Japan’s national broadcaster NHK that JAL was seeking an investment of some $550mn from Delta, as well as a capital injection from Air France-KLM. Delta was even reported to be in talks to take a minority stake in the Japanese carrier. NHK also reported that Delta and JAL contemplated joint operation of international flights.

Such an arrangement would have meant much to Delta, whose SkyTeam alliance lacks a Japanese affiliate. In addition to shared routes and passengers, a tie-in with JAL would give Delta coveted access to Tokyo’s Haneda Airport. Through its merger with Northwest its operations are now confined to the main international airport, Narita, at some distance from the capital’s business center. Writing at that time in the Atlanta Journal-Constitution , Kelly Yamanouchi noted the observation of airline consultant Bob Mann that Japan is a “very concentrated market” for airlines, with only two major carriers – Japan Airlines and All Nippon Airways. Both their alliances compete with Delta’s SkyTeam. Mr Mann said: “Not having either of them in SkyTeam is a major disadvantage” to Delta. (11 September) › The Journal-Constitution noted that, while restrictions on foreign ownership of airlines have tended to limit such activity, some US airlines have held small stakes in foreign airlines in the past. These include an American Airlines stake in Spain’s Iberia and a Continental Airlines stake in the parent company of Copa Airlines, of Panama. In brief . . . › Sustained high oil prices and a forecast for economic growth in 2010 have significantly brightened Russia’s economic outlook – so much so that, on 5 November, the country’s finance minister met with bankers in London to discuss a possible new government bond issue. This was considered the strongest sign to date that Moscow plans to resume foreign borrowing for the first time since its 1998 default on debt. With almost all its Soviet-era public debt paid off, and the rise in the price of oil making another default far less likely, Russia is in a good position to negotiate favourable terms with lenders. › On 28 October the 7.6-mile Incheon Bridge in South Korea opened to traffic on time, 52 months after the privately financed $1.6bn project was launched. The crossing, which links Incheon City to Yeongjong Island, incorporates a 0.9-mile cable-stayed bridge with a 2,625-ft steel box-girder main span. Britain’s Amec PLC was project manager of the turnkey joint venture. Builder Samsung Corp worked to a design by Canada’s Buckland & Taylor Ltd detailed by Japan’s Chodai Co Ltd. Dorothy Fabian , Features Editor (USA)

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