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Business News/ Companies / Delta in talks to take Japan Airlines stake: source
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Delta in talks to take Japan Airlines stake: source

Delta in talks to take Japan Airlines stake: source

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Tokyo: Delta Air Lines, the world’s biggest carrier, is in talks to take a stake in Japan Airlines Corp and forge a business alliance, a source familiar with the matter said on Friday.

The business alliance will likely include code-sharing on international flights, the source said, speaking on condition of anonymity because the deal has not been decided and the negotiations are not public.

Shares of Delta, which declined to comment on the report, were up 2% in morning New York Stock Exchange trading.

“I can’t verify what has been reported by NHK and can’t comment further at this time," a Japan Airlines spokeswoman said.

Standard & Poor’s Equity analyst Jim Corridore reiterated his “buy" rating on Delta, saying the purchase of a Japan Airlines stake would boost the Atlanta-based carrier’s presence in Japan and further diversify its international route network.

“While we might question the timing of any major cash outlay during a severe air travel demand downturn, we think DAL has enough cash on its balance sheet to make a major investment," Corridore said in a research note.

Japan Airlines, or JAL, posted a 99 billion yen ($1.1 billion) net loss for the April-June quarter and is headed for its second-straight annual loss this business year to March, hit by a downturn in travel and as it struggles to rein in costs.

The earnings slide forced JAL to secure a 100 billion yen credit line earlier this year backed by the government, a deal that has required it to draw up a wide-ranging restructuring plan under supervision by the state.

JAL has announced plans to cut unprofitable routes, reduce its workforce, merge its cargo business with a rival and slash pension costs in a controversial measure that could be derailed with retirees opposed to the move.

Delta, which acquired Northwest Airlines last year, has moved to ramp up its operations in high-growth markets even as weak air travel demand has hurt financial results.

For instance, last month Delta announced a deal with US Airways Group Inc <LCC.N> to swap takeoff and landing rights at New York’s LaGuardia and Washington Reagan National airports. The accord, which must be approved by US regulators, would enable Delta to more than double the nonstop destinations it serves from LaGuardia, and bolster the company’s plans to build a major hub in New York.

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Published: 12 Sep 2009, 12:44 AM IST
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