Japan Airlines May Seek Air France Accord After Deal With BA

Japan Airlines Co., considering the formation of a venture on European routes with British Airways and Spain’s Iberia, may seek a similar tie-up with Air France to bolster operations on the continent.

“Our alliance with British Airways is the key,” President Masaru Onishi said in an interview at the carrier’s Tokyo headquarters on Aug. 5. “If we can cover all of Europe with them, which would include Iberia as well, then we won’t need other joint ventures. If not, we’ll look to other airlines.”

JAL may also boost cooperation with Oneworld alliance members beyond BA and Iberia, including Finnair Oyj (FIA1S) on European routes, Onishi said, as it offsets cuts made to its overseas network during a government-backed restructuring. The carrier has already formed a venture with AMR Corp.’s American Airlines that sets fares, sells tickets and decides schedules on trans- Pacific routes to boost sales and pare costs.

“We want to build similar agreements in Europe to our North American one,” Onishi said. The airline currently flies to four cities in Europe, after halting flights to Amsterdam, Milan and Rome as part of its turnaround.

Onishi declined to say when he expected to reach an agreement with British Airways and other carriers. BA and Iberia completed a merger earlier this year, forming International Consolidated Airlines Group SA.

SkyTeam No Bar

All Nippon Airways Co., Japan’s largest listed carrier, has already agreed to a similar tie-up on European routes with Deutsche Lufthansa AG (LHA), which will come into effect in October.

Oneworld allows carriers to cooperate with airlines in different groupings, so Air France’s membership of SkyTeam wouldn’t prevent a tie-up, Onishi said. JAL codeshares on Air France flights to 13 cities, including Paris, Barcelona, Berlin, Copenhagen, Dusseldorf and Hamburg, according to its website.

“We could expand our business in Europe with Air France and KLM,” said Onishi. Air France-KLM (AF) owns both European airlines.

Air France codeshares with JAL on routes including Paris- Tokyo and is open to “reinforcing the partnership in a mutually beneficial way,” spokeswoman Constance Meyenberg said, adding that the arrangement could be extended to other European cities.

London-based IAG regards Japan Airlines as a “key partner,” spokewoman said Laura Goodes said today. “We’re looking forward to developing a closer relationship with them,” she said.

AMR Boost

JAL’s venture with American Airlines, which began in April, covers 10 routes between Asia and North America, including New York-Tokyo and Beijing-Chicago. The carriers predicted a combined 13 billion yen ($166 million) in annual sales and cost- cutting gains from the accord.

“We’ve boosted our competitiveness on trans-Pacific routes,” Onishi said. “We’ve been able to improve cooperation and so we’re moving to the second stage, which is making it stronger,” he said without elaboration.

JAL has also boosted its internal management by learning from American, Onishi said. For instance, following the March 11 earthquake, the carrier was able to adjust its schedule on a weekly basis because of techniques learned from its partner, which meant it was better able to match capacity to rapidly fluctuating demand, he said. Previously, the airline would have only adjusted flights in one-month intervals, he said.

IPO Plan

JAL last week reported operating profit of 17.1 billion yen for the three months ended June 30, an increase of 4.3 percent from a year earlier. Tokyo-based All Nippon had a first-quarter operating loss of 8.1 billion yen after Japan’s largest earthquake on record and ensuing nuclear disaster sapped travel.

JAL expects to make a full-year operating profit of 76 billion yen, after shedding staff, cutting flights and retiring planes while under bankruptcy-court protection.

The airline, now controlled by the Enterprise Turnaround Initiative Corp. of Japan, a government-backed turnaround fund, is considering an initial public offering as early as next year. It was delisted in February last year after filing for bankruptcy the month before.

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.