Japan’s most famous (and, recently, most beleaguered) airline, JAL, has apparently opted to leave the oneWorld alliance for SkyTeam. Viewed through an USA-based frequent flyer lens, that’s a win for Delta (and potentially those who hold Delta miles), and a definite blow for American Airlines and their mileage addicts.
Delta and its SkyTeam partners didn’t just win this on their good looks and winning personality. They are offering a bailout package of nearly $1 billion. (American and Texas Pacific Group offered to invest $1.1B; I’m not familiar with the details of the deals, and that’s not my concern here. And nothing is signed yet — AA says they’re still negotiating.)
The combination of JAL and Delta would be a formidable force, if traffic remains at current levels. One report estimates the JAL-enhanced Skyteam market share at 62% of traffic between the US and Japan. Star Alliance (United, ANA, and Singapore) hold 31%, leaving a mere 9% in oneworld (entirely AA).
But JAL has signaled that it would drop 30 (or even all) of its international routes, ceding that traffic to alliance partners and codesharing instead. And Japan’s other major airline, ANA, is looking to snap up routes and landing rights which JAL gives up. So those market share percentages are far from set in stone.
In the long run, the decrease in competition is bound to exert upward pressure on trans-Pacific fares. The deal will need to undergo antitrust scrutiny, of course.
Intermediate-term losers here are American Airlines’ loyal customers who use their miles to fly to Asia. A major mileage redemption opportunity for AAdvantage mileage holders is about to disappear, either through JAL’s switch to SkyTeam, or their erosion/implosion. If you’ve got American miles, your currency is about to lose value, as you’re about to lose some redemption opportunities.
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January 6th, 2010 at 1:59 am
JAL = Japan’s PanAm – shrinking itself into oblivion?
January 6th, 2010 at 8:12 am
That’s an apt (but sad) analogy, Oliver.
January 6th, 2010 at 1:49 pm
Longer term, the prospects are entirely unclear. $1 billion out of Delta’s pocket for “Japan’s PanAm” might end up being extremely costly…
January 6th, 2010 at 5:56 pm
@justanotherblogger, true, it’s a risk for Delta. I keep thinking that the Star Alliance carriers are the real winners here. United/ANA/Singapore effectively lose a competitor (JAL) and Delta picks up the tab.
January 6th, 2010 at 7:35 pm
My money is still on AA, news reports to the contrary notwithstanding. My bet is tha the Delta stories are just posturing to improve the deal that JAL will eventually get with AA one way or the other.
January 6th, 2010 at 7:58 pm
@Gary, well, don’t count AA out, indeed. They say they’re sweetening the deal and are willing to invest in JAL, even in bankruptcy. Sounds like a bidding war, indeed.
United has to be smiling, watching Delta and American duke it out. Pass the popcorn.
January 8th, 2010 at 11:45 pm
Even with JAL out of OneWorld, they’ll still have Cathay Pacific / Qantas to service all those AA point redemptions to Asia, no? I agree with the comments above though, AA (and the rest of OneWorld I’m sure) will not give JAL up easily….Years ago when Air Canada was in trouble, United was crucial in helping fight off AA from a takeover bid…I’m sure AA feels like United in this case.
January 19th, 2010 at 9:32 pm
[...] JAL Japan’s JAL officially declared bankruptcy and defaulted on its bonds. The bidding war for the airline reached an impasse, but will resume now that bankruptcy is [...]
January 20th, 2010 at 8:41 pm
Never mind movies about giant sharks and airplanes the real sharks will be circling JAL now.
February 9th, 2010 at 10:06 pm
[...] in the alliance. At first, it really looked like Delta and their SkyTeam brethren were the ones to convert the ailing Japanese carrier to their side. But no. I called this one wrong. Delta has expressed its regrets, and plans to invest in its own [...]