oneworld news

[Pieter C. 5]

EC issues 'statement of objections' to AA/BA/IB cooperation

 

Monday October 5, 2009

 

The European Commission confirmed Friday that it sent a "statement of objections" to American Airlines, British Airways and Iberia in September, warning the carriers that their proposed cooperation on transatlantic services "may be in breach of European rules on restrictive business practices."

 

The EC in April opened an antitrust inquiry into the proposal, which would see the oneworld partners deepen their cooperation across the Atlantic by coordinating commercial, operational and marketing activities, in particular by jointly managing schedules, capacity and pricing as well as sharing revenue on transatlantic routes.

 

The EC's specific objections were not made public. It emphasized that issuance of the document to the carriers "is a formal step in Commission antitrust investigations" that does "not prejudge the final outcome." The carriers can respond in writing or request an oral hearing.

 

"We have received the EU's statement of objections and look forward to the opportunity to address and overcome the EU's concerns, especially given the substantial benefits for consumers," BA said in a statement. "The EU's thorough review of our plans and supporting evidence was anticipated."

 

Virgin Atlantic Airways, a vocal critic of the proposed transatlantic pact, "welcomed" the EC's issuance of objections, stating, "Virgin Atlantic would expect the Commission to find that the proposed alliance would damage competition and consumer interests on all six of the routes from [London] Heathrow to the US on which BA and AA both operate currently. These include Heathrow to New York JFK on which BA and AA together would control 62% of all capacity and would have an unassailable grip on time-sensitive premium passengers."

[Pieter C. 5]

JAL To Shelve Talks With Delta, American

 

October 5, 2009

 

Japan Airlines plans to put on hold tie-up talks it has been holding separately with Delta Air Lines and American Airlines, Japan's Kyodo news agency reported on Monday.

 

Delta and a rival group led by American Airlines have been in talks to invest in JAL and form closer ties, eyeing expansion in Japan and the rest of Asia. JAL is Asia's largest airline in terms of annual revenue.

 

However, Kyodo said JAL has decided to focus first on putting together a restructuring plan with the government task force that is overseeing the airline's revival after the government backed a JPY100 billion yen USD$1.11 billion) loan.

 

JAL, weighed down by USD$15 billion in debt and headed for its second straight annual loss, could resume talks with American and Delta after it has put its restructuring on a solid track, Kyodo said.

 

JAL spokeswoman Sze Hunn Yap said she could not verify the report and declined to comment further.

 

"I'd be surprised if there was any kind of action this year, actually," said airline consultant Robert Mann.

 

"It removes the immediate issue of American's potentially losing JAL (from the Oneworld Alliance)," Mann said. "But it doesn't resolve the problem one way or the other."

 

The restructuring of JAL took a new turn in late August when the Democratic Party came to power in a landslide election victory, ending the rule of the Liberal Democratic Party, which had supported state help for the airline.

 

The Democrats have said JAL's restructuring plan, which includes cutting 6,800 jobs and eliminating 50 routes, did not go far enough and it assigned a task force to push through more drastic cost cuts.

 

JAL is seeking JPY250 billion in funding to carry it to the end of the financial year in March 2010 and it is widely expected that the state will have to give it a capital infusion to keep it afloat.

 

Both Delta and American have been courting JAL with the promise of an equity investment so they can gain access to promising routes in Asia, including those in Japan, where Tokyo's Haneda airport is undergoing a major expansion.

 

American teamed up with British Airways and Qantas Airways to keep JAL in the Oneworld Alliance grouping of airlines, sources said last month. They said that executives from all three carriers met JAL in September.

 

Delta has been wooing JAL to join the rival SkyTeam alliance, sources have said. The media has reported that fellow SkyTeam member Air France-KLM was a potential partner with Delta for an investment in JAL.

 

Delta has offered to invest about JPY30 billion (USD$334 million) in JAL, Kyodo said.

 

(Reuters)

[Pieter C. 5]

British Airways To Cut 1,700 Cabin Crew Jobs

 

October 6, 2009

 

British Airways said on Tuesday it would cut the equivalent of 1,700 staff in the UK and was planning a two-year freeze on basic pay for cabin crew.

 

As part of the changes, the loss-making airline said that from November it would change the way it rostered airborne staff, flying planes with one fewer cabin crew member but still above minimum safety limits.

 

It said it had consulted staff on the moves and was not altering anything that required negotiation.

 

But a union source said the roster alteration was in effect a change to staff contracts, adding the move could bring industrial action nearer.

 

The airline said it had made its announcement after failing to reach an agreement with unions representing 14,000 cabin crew in spite of nine months of talks.

 

It said 1,000 cabin crew had volunteered for redundancy and a further 3,000 had opted to switch to part-time working, in a reduction equivalent to the loss of 1,700 positions.

 

"Without changes, we will lose more money with every month that passes. It is essential we make ourselves more efficient if we are to ensure our long-term survival," the airline added.

 

(Reuters)

[Pieter C. 5]

AA pilots state 'unequivocal opposition' to AA/BA/IB immunity

 

Tuesday October 13, 2009

 

Proposed cooperation on transatlantic services by American Airlines, British Airways and Iberia received another rebuke late last week when AA's 11,500 pilots, represented by the Allied Pilots Assn., stated their "unequivocal opposition" and urged the US Dept. of Transportation to reject granting antitrust immunity for the venture.

 

APA cited the "statement of objections" recently sent to the carriers by the European Commission, which warned that the proposed close coordination "may be in breach of European rules on restrictive business practices". APA President Lloyd Hill said in a statement, "Given [the EC's] stated concerns, we question the advisability of granting approval to a deal that may fail to pass muster with the DOT's European counterparts. . .The EC's ongoing investigation is yet another indication that the DOT should step back from the brink of permitting ever more collusive behavior in the airline industry."

 

Further, Hill noted that AA "management has refused to provide industry standard job protections for our pilots. . .We can only conclude that our worst fears would be realized in the event American Airlines is permitted to proceed with what amounts to a virtual merger with British Airways and Iberia."

 

AA responded, "It's unfortunate that the APA continually tries to undermine our joint business agreement [with BA and IB] and our application for antitrust immunity, something that we strongly believe will generate growth and flying opportunities for our pilots. . .While we're disappointed by the union's frequent attempts to influence talks at the negotiating table with its public opposition to the joint business, we continue to believe that the JBA will be good for the longevity of the company and remain optimistic about regulatory approval of our application."

[Pieter C. 5]

JAL Seeks USD$6.7 Bln Financial Rescue Package

 

October 13, 2009

 

Japan Airlines has asked its creditors for a total of JPY600 billion yen (USD$6.7 billion) in financial aid as part of a restructuring plan to revive the loss-making carrier, two sources familiar with the matter said.

 

The request includes JPY300 billion in debt waivers and debt-for-equity swaps and another JPY300 billion in fresh loans and capital. Most of the loans would be guaranteed by the state, which would also shoulder part of the capital increase, the sources said.

 

The sources, who spoke on condition of anonymity because the plan is not yet public, said creditors remain wary of extending further assistance and that a failure to reach an agreement could push JAL into a court-led workout.

 

No one at JAL could be reached for comment.

 

The struggling airline, Asia's largest by revenue, has been scrambling to put together a new turnaround plan under the supervision of the government, which is overseeing its restructuring after backing a JPY100 billion loan.

 

JAL had proposed a plan in September under which it pledged to cut 6,800 jobs, eliminate 50 routes and lower operating costs by 30 percent, but it was forced back to the drawing board after the government said the steps were not enough.

 

It was widely expected to seek aid from its banks and the government to pay for the restructuring given the wobbly state of its capital structure, which is light on equity and weighed down by USD$15 billion in debt.

 

Kyodo news had first reported earlier on Tuesday that JAL was seeking a debt waiver and debt-for-equity swap totalling about JPY250 billion. JAL had declined to comment on that report.

 

JAL plans to increase job cuts to about 10,000, or more than one-fifth of its workforce, and its president, Haruka Nishimatsu, will step down and be replaced by someone from outside the company.

 

TALKS ON HOLD

 

JAL has put on hold separate talks with Delta Air Lines and American Airlines for a capital infusion and business ties, aiming to focus first on its own revival plan, Kyodo reported last week.

 

The restructuring of JAL took a new turn in late August when the Democratic Party came to power in a landslide election victory, ending the rule of the Liberal Democratic Party, which had supported state help for the airline.

 

The Democrats have said they do not want to see JAL fail but have not been clear on the extent to which they would be willing to use state finances to that end.

 

Aid from the government has been seen as a vital component of JAL's restructuring, either in the form of loan guarantees or a capital injection. Otherwise, JAL's creditors would be reluctant to extend fresh loans, bankers have said.

 

JAL's largest creditor is the state-owned Development Bank of Japan with JPY230 billion in loans outstanding at March 31.

 

Other lenders include Mizuho Corporate Bank with JPY57 billion in loans, Bank of Tokyo-Mitsubishi UFJ with JPY53 billion and Sumitomo Mitsui Banking Corporation with JPY37 billion.

 

The new transport minister, Seiji Maehara, has set up a special task force to help put together the new turnaround plan.

 

"I met with the task force members this morning and I got the impression they can come up with a fundamental solution," Maehara told a news conference on Tuesday.

 

(Reuters)

 

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AA, BA Immunity Plan Causing Concern

 

October 13, 2009

 

A proposal by American Airlines and British Airways to deepen their ties poses serious competition concerns, two senior US senators said on Tuesday.

 

Herb Kohl and Orrin Hatch, the chairman and senior member, respectively, of the antitrust subcommittee, said the deal merited close antitrust scrutiny by the Justice Department.

 

"While not expressing any views on the ultimate merits of this application, we believe this alliance application raises significant competition issues," they said in a letter to Transportation Secretary Ray LaHood and DOJ antitrust chief Christine Varney.

 

The senators urged transportation regulators, who have the final say on the matter, to "act cautiously" in reviewing the plan and approve it only if they can ensure that a broad alliance would not "significantly harm competition."

 

American and British Airways are seeking immunity from US federal law to share pricing and scheduling information as well as other operational details under the oneworld alliance.

 

(Reuters)

[Pieter C. 5]

BA's Walsh: Merger talks with Iberia progressing, announcement coming

 

Thursday October 15, 2009

 

British Airways CEO Willie Walsh said merger talks with Iberia have progressed significantly since Altadis Antonio Vazquez replaced Fernando Conte as IB chairman and CEO in July and predicted an announcement regarding a possible joining of the two oneworld carriers will come "in the weeks ahead."

 

Following a speech yesterday to the International Aviation Club in Washington, Walsh said discussions with IB regarding a merger "have gone on considerably longer than I expected," but commented that the "change in management" at the Spanish carrier over the summer has enabled more productive negotiations. "A merger between BA and Iberia represents a good step forward," he said. While consolidation won't solve the financial problems facing airlines around the world, "it is part of the solution," he said.

 

Walsh also noted that BA is "clearly interested" in acquiring part or all of bmi if Lufthansa, which this month assumed effective control of the loss-making carrier, "should choose to dispose of it". He added that BA has "had no discussions at this point" regarding bmi, but is closely following LH's statements about the carrier in the media.

 

Regarding Japan Airlines, another carrier in which BA is speculated to have an interest in taking a stake, he said the Tokyo-based company is a "very important member of oneworld" and that BA wants to see it remain in the alliance. Struggling JAL confirmed it has held talks with both Delta Air Lines and American Airlines regarding one of those carriers taking a stake to help boost its weak financial position.

 

BA has admitted it has participated in talks with JAL related to the potential stake sale to help induce it to stay in oneworld; alliance members are fearful that a JAL/DL tie-up could lead the Japanese airline to jump to SkyTeam. "I believe that Japan Airlines can and does benefit from oneworld," Walsh said yesterday. "At this point we have not considered whether we should make an investment [in JAL], but I am keeping an open mind on that proposal."

[Pieter C. 5]

JAL Slumps, Investors Say Bankruptcy An Option

 

October 16, 2009

 

Japan Airlines' shares slid 12 percent to a record low on Friday as investors suggested bankruptcy may be an option for Asia's biggest airline by revenue, even as the government again pledged to support the troubled carrier.

 

"There's increasing concern about the future of the company and whether it's heading for a GM-style bankruptcy or not," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

 

The airline, plagued with high costs in a severe industry downturn, has asked creditors for JPY600 billion yen (USD$6.6 billion) in financial aid, including JPY300 billion in debt waivers and debt-for-equity swaps, as part of a restructuring plan, according to two sources familiar with the matter.

 

JAL shares fell to JPY100, their lowest since they were re-listed in 2002. By the close, the stock was quoted at JPY101, down more than 11 percent. The shares have lost a quarter of their value this week.

 

Last month, JAL proposed a plan under which it pledged to cut 6,800 jobs, eliminate 50 routes and lower its operating costs by 30 percent, but it was forced back to the drawing board after the government said the steps were not enough.

 

The airline is now working with a government-appointed task force on a new plan to put to the transport ministry within two weeks. Transport Minister Seiji Maehara on Friday pledged his support for the airline while that process is underway.

 

"From I can see in the pre-draft plan I received the other day from JAL and its task force, I am confident that work on the plan is progressing smoothly," said Maehara, adding there was no change in the government's stance to support the airline.

 

But the lack of a clear growth plan for JAL is fuelling market concern that a rescue package may be throwing good money after bad, some investors said, leaving creditors such as Mitsubishi UFJ Financial Group and Mizuho Financial Group out in the cold.

 

MUFG, JAL's No.2 creditor behind the state-owned Development Bank of Japan, is owed about JPY50 billion (USD$551 million).

 

Kyodo news agency reported JAL was reconsidering a plan to sell shares in its group firms, suggesting that restructuring efforts needed to turn the company around might be slow to come.

 

"Even if they do get the funds, where's the prospect of growth? I don't see it," said a portfolio manager at a Japanese asset management firm, who asked not to be named as he was not authorised to comment on individual stocks.

 

"In some ways, bankruptcy might be the better option -- it would allow the firm to restart from a clean slate."

 

(Reuters)

[Pieter C. 5]

FAA Probe Of American Air May Widen

 

October 18, 2009

 

American Airlines operated jets later found to have substandard repairs, and federal regulators are probing allegations that at least one plane was considered unsafe to fly at normal cruise altitude, the Wall Street Journal said.

 

The newspaper, citing people familiar with the matter, said the latest moves by the Federal Aviation Administration indicate the agency is expanding its probe into suspected structural problems with rear bulkheads on some of American's fleet of MD-80 jets, the newspaper said.

 

FAA inspectors are pursuing allegations by pilots that one of those MD-80s was believed to be in such poor condition that it was ferried without passengers from Dallas to the carrier's Tulsa, Oklahoma maintenance base at unusually low altitudes to avoid the stress of pressurising the fuselage during the trip, the newspaper said.

 

Preliminary FAA findings have identified as many as 16 American Airlines twin-engine MD-80s that were operated for months despite allegedly substandard bulkhead repairs. Agency investigators are looking into whether other MD-80s also may have been flown for repairs at low altitudes without passengers, The Wall Street Journal reported on Saturday.

 

No ruptures in the rear bulkhead on the American MD-80s have been reported to the FAA, the newspaper said.

 

But people familiar with the investigation said American potentially faces millions of dollars in civil penalties stemming from the widening investigation, and the FAA is also considering the unusual tactic of eventually taking punitive action against individual mechanics or supervisors who may have signed off on substandard work.

 

A spokeswoman for the FAA would not comment on specifics in the story.

 

"There is an investigation and it would be premature to talk about any of the results of that," said FAA spokeswoman Laura Brown.

 

(Reuters)

[Pieter C. 5]

Flight trim issue leads to slight delay to two Qantas A380s

 

Monday October 19, 2009

 

Qantas will have to wait until December for the delivery of its fifth and sixth A380s after encountering flight stability problems with the fifth aircraft, which had been expected to enter service on US routes next month.

 

QF confirmed to ATW that the aircraft will require further testing in Toulouse to rectify a minor trim stability problem. However, it dismissed media rumors that the A380 was not flying straight while on autopilot.

 

"The problem relates to the flight trim, which controls the aircraft's ability to maintain its center of gravity," QF said. "Qantas has robust contractual provisions in place with all aircraft manufacturers, including Airbus, that govern tolerances around aircraft specifications, including flight trim." It added that the delay would have no material impact as the aircraft were not yet placed into the northern winter schedule.

[Pieter C. 5]

JAL Cuts Debt Relief Request, Banks Reject

 

October 20, 2009

 

A government-appointed task force crafting a revival plan for Japan Airlines cut its debt relief request to JPY250 billion yen (USD$2.8 billion) from JPY300 billion, but creditors still rejected the plan, two sources said.

 

The latest plan was rejected because creditors feel the JPY250 billion in debt waivers and debt-for-equity swaps still asks them to carry too large a burden, said the sources, who spoke on condition of anonymity because the discussions are not public.

 

Creditors, which include the country's top three lenders and state-owned Development Bank of Japan, are also wary of extending fresh aid without a clear explanation of how and to what extent the state is willing to inject public funds.

 

The task force, which is composed of turnaround specialists and which reports to transport minister Seiji Maehara, did not give details on public funds or what scheme would be employed for the debt restructuring, the sources said.

 

JAL, Asia's largest airline by revenue, is headed for its second straight annual loss, weighed down by some USD$15 billion in debt and a bloated cost base that makes it less efficient than domestic rival All Nippon Airways.

 

The task force's latest plan assumes JAL's operating loss will balloon to JPY200 billion in the business year to March 2010 from its current forecast for a loss of JPY59 billion, the two sources said.

 

The JPY250 billion in debt relief is based on the estimate that JAL will be able to improve to an annual operating profit of JPY50 billion in five years, the sources said.

 

JAL has been restructuring under state supervision since it received a JPY100 billion government-guaranteed loan in June.

 

(Reuters)

[Pieter C. 5]

JAL Seeks JPY50 Bln Debt Relief

 

October 21, 2009

 

A government-appointed task force working on a revival plan for Japan Airlines has asked the Development Bank of Japan to provide more than JPY50 billion yen (USD$550 million) in debt waivers and debt-for-equity swaps, the Nikkei reported.

 

The task force -- which reports directly to Transport Minister Seiji Maehara -- is also asking Mizuho Corporate Bank to agree to nearly JPY50 billion in debt waivers and debt-for-equity swaps, said Nikkei.

 

The paper said the company's lenders are urging the task force to lobby the government to reduce Japan's airport usage fees and other charges that are high compared with overseas peers.

 

JAL pays an estimated JPY100 billion to JPY120 billion a year in landing fees, airport facility fees and fuel taxes, said the paper.

 

The struggling airline, Asia's largest by revenue, has been putting together a new turnaround plan under the supervision of the government, which is overseeing its restructuring after backing a JPY100 billion loan.

 

Separately, Nikkei said, JAL plans to reduce its 90.7 percent interest in JAL Hotels.

 

But it intends to remain the biggest shareholder, Nikkei said, quoting the JAL unit's president, Katsumi Chiyo.

 

(Reuters)

[Pieter C. 5]

JAL's Net Loss May Balloon To USD$5.5 Bln

 

October 22, 2009

 

Japan Airlines' net loss may balloon to about JPY500 billion yen (USD$5.5 billion) for the year to March as the heavily indebted carrier plans to book hefty restructuring charges, the Yomiuri newspaper reported on Thursday.

 

The forecast, which is almost eight times bigger than the firms' own earlier projected loss, has been included in a new turnaround plan being put together by a government-appointed taskforce and presented to creditor banks, the paper said.

 

JAL needs a bailout as it has been hammered by high costs and a sharp downturn in air freight and passenger traffic after the global financial crisis. A source familiar with the matter said this week that a previous rescue plan had been rejected by creditors because of the level of debt waivers required.

 

Shares in the airline, which some investors suggest should go bankrupt and then be rebuilt, fell 4 percent on Thursday after the report of the much bigger loss.

 

"Until a final decision has been made, we really just don't know about it all," said Takashi Ushio, head of the investment strategy division at Marusan Securities.

 

"But fundamentally, the government just can't let a company like JAL collapse."

 

JAL's operating loss is likely to be around JPY200 billion, almost four times an earlier company estimate of a loss of JPY59 billion, due to weak passenger demand amid the economic downturn, the Yomiuri reported.

 

The airline, weighed down by USD$15 billion in debt, also plans to book special charges for an early retirement programme and the disposal of large aircraft, the paper said.

 

The Nikkei newspaper said the taskforce had asked JAL's largest creditor, the government-owned Development Bank of Japan, to commit to more than JPY50 billion in debt waivers and debt-for-equity swaps -- about 20 percent of what it was owed by the airline as at March 31.

 

Mizuho Financial Group, also a creditor, had been asked to agree to nearly JPY50 billion in debt waivers and debt-for-equity swaps, the paper said.

 

PREVIOUS PLANS REJECTED

 

Creditors rejected one bailout plan on Sunday and requested a new one with less debt forgiveness as well as clarity on how the airline will cut pension obligations and how much the state will provide in capital and loans, a source with knowledge of the meeting said.

 

JAL faces heavy political pressure to maintain unprofitable services to small centres and has a bloated cost base that makes it less efficient than rival All Nippon Airways.

 

Its shares, which traded at JPY121 on Thursday, have fallen nearly 30 percent in the past month.

 

The Development Bank of Japan was owed JPY230 billion as of March 31, while Mizuho is owed JPY53 billion. Other big Japanese banks owed money include Mitsubishi UFJ Financial Group with JPY57 billion and Sumitomo Mitsui Financial Group with JPY37 billion.

 

JAL has been restructuring under state supervision since it received a JPY100 billion government-guaranteed loan in June.

 

It put forward a plan last month that included axing 6,800 jobs and 50 routes and a 30 percent cut in operating costs, but the government said the steps were not enough.

 

The next plan, increasing the job cuts to around 10,000, did not satisfy creditors who felt they were being asked to carry too much of the burden.

 

CREDIT RISK

 

Last week, ratings agency Standard & Poor's cut its long-term corporate credit rating on JAL by two notches to "B-" from "B+" and warned it could lower it to "SD" or "selective default" if creditors exchange debt for equity or forgive debt.

 

Despite its woes, JAL's extensive network in Asia and access to the Chinese market has made it attractive to US airlines.

 

The airline, a member of the Oneworld airline alliance, has held separate talks about a capital injection with American Airlines, its alliance partner, and Delta Air Lines -- a member of the rival SkyTeam group.

 

(Reuters)

[Pieter C. 5]

JAL Faces USD$8.8 Bln Excess Debt If Liquidated

 

October 23, 2009

 

Liabilities at Japan Airlines would exceed its assets by USD$8.8 billion if Asia's largest airline by revenues were liquidated, a source with direct knowledge of the matter said on Friday.

 

The estimate of JAL's negative net worth, calculated by a government-led task force in charge of its restructuring, underscores the depth of the problems facing the airline as it seeks aid from banks and the state to avoid bankruptcy.

 

Shares of JAL, which are down more than 40 percent this year and hit a record low last week, slid 6.6 percent, extending losses after the Nikkei newspaper said some creditors wanted JAL to cut its capital to hold shareholders accountable.

 

The task force, which is led by turnaround specialists and reports to Transport Minister Seiji Maehara, is seeking a bridge loan of about JPY180 billion yen to prevent JAL from running out of cash next month and a total capital boost of JPY300 billion from both the government and the private sector, said the source, who spoke on condition of anonymity.

 

"It's a 'national flag' kind of thing and allowing it to fail would damage trust in Japan," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. "It's even more symbolic than GM, and an airline is essential. They'll inject public funds."

 

JAL is headed for its fourth annual loss in five years, weighed down by roughly USD$15 billion in debt and a bloated cost base.

 

Maehara told a news conference he met Prime Minister Yukio Hatoyama and Finance Minister Hirohisa Fujii earlier on Friday to discuss the state's role in supporting JAL, and that a final decision on the matter would fall to Hatoyama.

 

"The reality is that 60 percent of the flights flying over Japan are JAL flights. If the situation becomes such that these don't fly, then that would make things difficult. We need to understand that," Hatoyama told reporters.

 

A JAL spokesman said: "We have not decided anything. We are crafting a revival plan from various viewpoints."

 

NEW SCHEME

 

The task force also wants to use a scheme recently introduced in Japan called "Alternative Dispute Resolution" under which a third party would mediate between JAL and its creditors on an out-of-court debt restructuring, according to the source.

 

But creditors, which include the country's top three lenders and the state-owned Development Bank of Japan, have so far rebuffed the plans presented by the task force, arguing they are being asked to carry too much of the burden to revive JAL.

 

The task force, which has asked creditors for JPY250 billion in loan waivers and debt-for equity swaps, needs to offer details on the use of public funds and map out a better plan to cut pension obligations and boost margins, bankers have said.

 

JAL's two likely options for a public fund injection would be to tap a revised law used earlier this year to prop up struggling chipmaker Elpida Memory or a government-backed corporate turnaround organisation established this month to buy the debt of and invest in struggling but viable firms.

 

Some creditors have suggested that JAL be forced to reduce its capital to clarify the responsibility of shareholders. One idea being floated is for JAL to retire about 99 percent of its common shares but remain listed, the Nikkei newspaper said.

 

"There are problems from the perspectives of the viability of the restructuring plan and the fairness of who shoulders the burden," a banker involved in the discussions said.

 

The task force's plan also includes JAL halving the number of subsidiaries and affiliates from 290, and cutting about 8,000 job cuts, almost a fifth of its work force, the source said.

 

The negative net worth figure of JPY800 billion is significantly higher than a JPY600 billion estimate reported by the Nikkei this week and the JPY250 billion assumed by Citigroup Global Markets Japan in evaluating JAL's shares.

 

"It is not certain whether JAL will go through a private reorganisation or file for bankruptcy, but even if it stays clear of bankruptcy, we think value for existing shareholders will be substantially reduced on dilution accompanying a big capital increase," analyst Naoko Matsumoto wrote in a note to clients.

 

The task force believes its restructuring plan would allow JAL to cut its negative net worth to JPY270 billion and enable creditors to collect on 20-30 percent of their loans, as opposed to just 2 to 3 percent in a bankruptcy, the source said.

 

Despite its woes, JAL's extensive network in Asia and access to the Chinese market has made it attractive to US airlines.

 

JAL, a member of the Oneworld airline alliance, has held separate talks about business ties and possible capital injection with American Airlines, its alliance partner, and Delta Air Lines of the rival SkyTeam group.

 

AMR Chairman Gerard Arpey and other American Airlines executives met JAL executives in Tokyo last week to continue discussions about bolstering their ties, a person with knowledge of the meeting said.

 

(Reuters)

[KK Lee 5]

BA and Iberia agree merger deal

 

British Airways and Spanish airline Iberia say they have reached a preliminary agreement for a merger expected to be completed in late 2010.

 

The merger, which must be approved by the European Commission, would create the world's third biggest airline.

 

Under its terms, Iberia would take a 45% stake and BA, which last week reported a six-month pre-tax loss of £292m, a 55% stake in the company.

 

"The merger will create a strong European airline well able to compete in the 21st Century," said BA chief executive Willie Walsh.

 

"Both airlines will retain their brands and heritage while achieving significant synergies as a combined force."

 

The two airlines had been discussing the deal at separate board meetings.

 

It would create an airline with 419 aircraft flying to 205 separate destinations, and would save the two partners 400m euros ($594m; £358m) in costs a year, they said.

 

Iberia's chairman Antonio Vazquez would take the same role at the new company, while Mr Walsh would become its chief executive.

 

News of the deal did not go down well with Virgin Atlantic, one of BA's big competitors in the UK, which raised concerns about the new company's market share.

 

"The merger will increase BA's dominance at Heathrow with 44% of take-off and landing slots this winter. It is impossible for any other airline to replicate their scale," the airline said.

 

http://news.bbc.co.uk/2/hi/business/8356780.stm

[Pieter C. 5]

JAL Seeks Bailout, Juggles Delta, American Offers

 

December 24, 2009

 

A decision on whether Japan Airlines will be kept afloat with taxpayers' money or allowed to go bankrupt will be made over the next few weeks.

 

At the same time JAL is being courted by American Airlines and Delta Air Lines. The US carriers have made rival offers of financial aid, keen to gain a greater foothold in Japan and access to JAL's network to the rest of Asia.

 

JAL says it will make a decision on which overseas partner it will choose by early January.

 

Following are possible scenarios for the restructuring of Asia's largest carrier by revenue.

 

JAL WINS SUPPORT FROM STATE-BACKED TURNAROUND FUND

 

The fact that JAL's share price is holding steady at around 100 yen suggests investors see an out-of-court restructuring under the auspices of the state-backed Enterprise Turnaround Initiative Corporation of Japan (ETIC) as the most likely outcome.

 

JAL applied to the ETIC for support in late October. The ETIC has finished basic due diligence on JAL's assets and is aiming to present a request to the main creditors soon for their help in lowering JAL's debt, sources familiar with the matter said.

 

The ETIC's combined request for debt forgiveness and debt-for-equity swaps will likely be around the same size as the JPY250 billion yen (USD$2.7 billion) sought by a government-appointed task force that worked on JAL's revival plan before its application to the ETIC.

 

However, there could be some provisions to make the deal more palatable to creditors, which include two state-owned lenders and the country's three largest private banks. The creditors remain keen to work with the ETIC to keep JAL out of bankruptcy court.

 

The ETIC, which can draw on JPY1.6 trillion in state-guaranteed funds to inject capital and buy the debt of troubled but viable Japanese companies, is expected to make a decision on whether to support JAL next month.

 

The disbanded government-appointed task force had estimated JAL would need JPY300 billion in fresh capital.

 

The ETIC has said it will support JAL only if it believes the carrier has the potential for revival, but it could face intense political pressure depending on the stance taken by the leaders of the ruling Democratic Party, who have so far given conflicting messages on the extent to which the state should support JAL.

 

JAL IS RESTRUCTURED OR LIQUIDATED IN BANKRUPTCY COURT

 

Chances of JAL facing a Chapter 11-style bankruptcy appeared to rise after Finance Minister Hirohisa Fujii said earlier this week that the government would not guarantee loans and other funding to JAL.

 

The state-backed Development Bank of Japan has set up a JPY100 billion loan facility for JAL on condition that the government guarantee it. JAL has used part of it but the DBJ may not lend the rest without a government guarantee.

 

JAL's earnings have deteriorated sharply and it is burning through cash. There is therefore a risk that it could run out of money for operations before the ETIC can make a decision to support it and start supplying it with funds.

 

The ETIC has told JAL's creditors that it has not ruled out the possibility of bankruptcy proceedings, sources said. Moreover, some Democratic Party lawmakers are keen to take a tough stance on JAL, given their view that many of its problems originate from the opposition Liberal Democratic Party's rule.

 

JAL must also get approval from two-thirds of retirees and employees for a reduction in pension benefits so it can cut its pension shortfall, estimated at JPY330 billion in March, to a more manageable size. This is a prerequisite of ETIC support.

 

The carrier said last week that just under 65 percent of retirees who responded to its survey had agreed to pension cuts, making it confident its proposals would be approved. But the final tally will not become clear until a deadline on January 12.

 

The government had said it was considering legislation to push through pension cuts, but it is unclear if such a bill would pass given that it could be interpreted as breaching constitutional protection of property rights.

 

There are two options for JAL's bankruptcy. One is a reorganisation under the Corporate Rehabilitation Law, a process similar to Chapter 11 in the United States and often used with large firms. The other option is a court-brokered liquidation.

 

The ETIC has said it could support a company that has filed for a court-led restructuring. The precedent is consumer electronics retailer Matsuya Denki, which filed for bankruptcy before receiving aid from the ETIC's predecessor, the Industrial Revitalisation Corporation of Japan (IRCJ), about six years ago.

 

STAYS WITH AMERICAN & ONEWORLD OR DEFECTS TO DELTA & SKYTEAM

 

JAL strongly denied a recent report in the Asahi newspaper that it would likely choose to end its ties with American Airlines and the Oneworld alliance and join hands with Delta and the rival Skyteam airline group.

 

JAL said it was not leaning either way and would make a decision by early January.

 

Some analysts say forging ties with Delta would make sense for JAL because the two have many overlapping routes, offering the best chance to lower its bloated cost base. Delta has estimated an alliance with it would bring a boost to JAL of USD$400 million in annual revenues.

 

American Airlines has emphasised the risk of switching alliances with JAL's operations in such a precarious state. It estimates JAL could lose USD$500 million in revenues over a two-year transition period if it left Oneworld.

 

American has also argued that Delta and JAL would be unable to get antitrust immunity under a recently signed "open skies" agreement between the US and Japan because SkyTeam would control the bulk of travel between the two countries.

 

Another potential strong point for the American camp is its offer of USD$1.1 billion in direct equity investment, along with private equity firm TPG and other Oneworld members. That is more than double the equity investment component of the roughly USD$1 billion financial aid package proposed by Delta and SkyTeam.

 

(Reuters)

[BC Tam 2]

Japan Airlines shares drop 45% as bankruptcy fears grow

 

Shares in Japan Airlines (JAL) fell by 45% to a new all-time low on Tuesday as fears grow that the carrier is heading for bankruptcy.

 

The fall came despite an improved offer of investment from American Airlines, up from $1bn to $1.3bn.

 

The US carrier is keen to link into JAL's lucrative Asian routes.

 

Meanwhile, JAL's current and former employees have agreed to cuts in the company's pension scheme payouts. The fund has a $3.6bn (£2.2bn) deficit.

 

Those cuts are crucial to the company gaining any government support.

 

Battle for skies

 

American Airlines' improved offer of help also comes with strings attached. It wants JAL to stay with the Oneworld alliance that American is also a member of, along with British Airways and Qantas.

 

JAL has another, rival, offer of support from the US. Delta Airlines is offering $500m and wants JAL to join its SkyTeam network.

 

Thomas W Horton, chief financial officer of American's parent, AMR Corp, said: "While JAL and the Japanese government might decide to address capital requirements internally - and we certainly would understand and respect that - our offer of capital would be available if this was deemed an appropriate resource to aid in the restructuring of JAL."

 

Staff cuts

 

Japan Airlines applied for a government bail-out in October last year through the state-backed Enterprise Turnaround Initiative Corporation of Japan (ETIC) - a body able to draw on taxpayers' money to prop up the business while it restructures.

 

A decision on that is due before the end of January, but the ETIC requires cost-cutting concessions, which not only include the restructuring of pension arrangements but also potentially severe job cuts of up to a third of the company's 49,000-strong workforce.

 

It will then inject fresh capital into JAL, provided the airline files for bankruptcy and creditors agree to waive around 350bn yen ($3.8bn, £2.36bn) in debts.

 

from the BBC

 

Oh dear !

[BC Tam 2]

Japan Airlines files for bankruptcy protection

 

Japan Airlines (JAL), Asia's biggest air carrier, has filed for bankruptcy protection, in one of the country's biggest corporate failures.

 

Some 15,000 jobs are expected to be cut. All board members have also voted to resign, according to Japanese media.

 

A state-backed turnaround organisation has said it plans to inject about 300bn yen ($3.3bn; £2bn) into JAL.

 

Japan's government says flights will continue as normal as the airline begins restructuring.

 

Its reorganisation will take place under the supervision of the state-backed Enterprise Turnaround Initiative Corporation (ETIC).

 

JAL will also receive a 600bn-yen credit line and get 730bn yen in debt waivers.

 

JAL shares have fallen to an all-time low, valuing the firm at just $150m - less than the price of a new jumbo jet.

 

The Tokyo Stock Exchange said shares in the carrier would be delisted on 20 February.

 

Along with other major global airlines, JAL has been hit hard by falling passenger numbers during the global downturn. The carrier has debts of $16.5bn.

 

Investors to lose out

 

"Basically this shows that nothing is too big to fail, that America's GM and Japan's JAL were in the same situation," said Koichi Ogawa from Daiwa SB Investments.

 

"What this has shown is that the nation won't just take total care of a company, that they've now said they'll let badly-run companies fail."

 

A third of JAL's workforce face the prospect of losing their jobs, the BBC's Roland Buerk in Tokyo says.

 

While the turnaround plan backed by the government will see the airline continue to fly, investors in the company are likely to lose most of their money.

 

from the BBC

 

Sad really

Wondering if JL will be history at KUL anytime soon ?

[KK Lee 5]

Sad really

Wondering if JL will be history at KUL anytime soon ?

 

As long JL flight to KUL is tagged to SIN should be safe.

 

[Cornelis Boersma 0]

Next week last commercial MD11 flight for Finnair. Probably operated by OH-LGG on 1 February Delhi-Helsinki AY022. After this flight both OHLGB and OHLGG are being phased out

 

MD11 also operated a flight to Miami last week, I guess a leisure flight.

[Cornelis Boersma 0]

On 22/23 February the last commercial MD11 flight has been operated for Finnair. It was the AY0021/AY022 stretch HEL-DEL-HEL. I flew this route 2 times in 2008 and 2009. I had to choose to fly this very last commercial flight or go A380 to join you guys for MW Anniversary in SIN this summer and decided to choose for the last option.

 

I tracked the flight DEL-HEL with the last MD11 arrival in Finnair service in Helsinki on 23 February.

Here some radar impressions.

 

 

 

 

You note the airport on the left top?

 

 

 

 

 

There wasn't any special celebrations when the last MD11 landed in Helsinki. The weather was cold, foggy, and some snowfall.

It seems that OH-LGG is now stored @ EFHK/HEL

 

Finnair and McDonnell Douglas. Kiitos for these great experiences in the past

Edited March 7, 2010 by Cornelis Boersma

[Pieter C. 5]

Thanks for the sequence shots, Cornelis !!!

 

I know there are quite a few of MD-11 'lovers' amongst the MW-members...

 

Care to share the website ?

[Cornelis Boersma 0]

http://www.flightradar24.com/

[Pieter C. 5]

UK's Brown Condemns British Airways strike

 

March 15, 2010

 

Prime Minister Gordon Brown on Monday strongly condemned a planned strike by British Airways cabin crew, putting him on a collision course with his main union backers weeks before an election.

 

Brown, who is battling to maintain ruling Labour's 13-year-grip on power in an election expected on May 6, said the seven-day airline strike was "unjustified and deplorable" and should be called off.

 

The Unite union which has called the strike is the largest financial backer for Brown's Labour party and its political director Charlie Whelan was once Brown's spokesman.

 

"It's the wrong time, it's unjustified, it's deplorable, we should not have a strike. It's not in the company's interest, it's not in the workers' interest and it's certainly not in the national interest," Brown told BBC Radio 4.

 

"I hope that this strike will be called off," he said in an interview on the Woman's Hour programme.

 

BA cabin crew plan a three-day strike starting next Saturday, followed by a four-day stoppage from March 27, jeopardising Easter holiday plans for thousands of travellers.

 

CONSERVATIVE ATTACK

 

The opposition Conservatives, their opinion poll lead shrinking in recent surveys, accused Brown of hypocrisy.

 

"Gordon Brown cannot have it both ways. He can't condemn the strike whilst at the same time taking money from the strikers' union and while at the same time allowing Charlie Whelan, the political director of that union, to have open access to 10 Downing Street," opposition finance spokesman George Osborne told a business summit.

 

"In the end it's a question of leadership for Gordon Brown. He has to cut off the links with the Unite union which is a party within a party now for the Labour Party," he added.

 

The Labour party was founded by the union movement, which remains its main financial backer.

 

However, unions are far less powerful than in the 1970s when they used to hold regular policy meetings with the Labour government.

 

The number of days lost to strikes is greatly diminished after the Conservatives curbed union power in the 1980s.

 

The prime minister's spokesman declined to comment on a newspaper report that Brown had called Unite joint general secretary Tony Woodley over the weekend to discuss potential solutions to the strike.

 

The strike centres on pay and staffing levels.

 

British Airways said it welcomed Brown's statement but said it remained available for further talks with Unite.

 

A Unite spokeswoman said that "informal lines of communications remain open" between itself and BA and that Unite "stands ready" to talk to the airline's management if it wants to re-open official discussions.

 

(Reuters)

[Y. J. Foo 0]

First AF-KL, then LH-LX, now this. Who will be the next?

 

-----

 

BBC reports that BA and IB have signed a merger agreement, and the merger is expected to finalise by the end of this year.

 

-BA shareholders will be the group's largest ownership with 55% of the share.

 

-London will be its HQ.

 

-BA-IB will operate as one of the largest airline groups in the world.

 

 

[BC Tam 2]

United and US Airways also reported to be in merger negotiations

If this consolidation via mergers trend continue, the airline industry could eventually follow the path of the airliner manufacturing industry, ie. USA vs Europe, Boeing vs Airbus