Business Travel Lobby Opposes Delta, JAL Ties

January 7, 2010

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Delta Air Lines would not get regulatory approval for close business ties with Japan Airlines and an alliance between the two carriers would lead to higher fares, a lobby for corporate travel buyers said.

Even as JAL flirts with bankruptcy, Asia's largest carrier by revenues is being wooed by Delta and American Airlines with offers of investment and close ties under an "open skies" treaty signed recently between the United States and Japan.

JAL currently partners American in the Oneworld alliance. A defection to Delta and the Skyteam group would create a virtual duopoly on US-Japan routes, giving SkyTeam and the rival Star Alliance combined control over 90 percent of that market.

"We are taking a strong stance against a Delta/JAL tie-up because it will effectively reduce the number of competitor alliances from three to two," Kevin Mitchell, Chairman of the Business Travel Coalition (BTC) told a news conference in Tokyo.

Mitchell said an alliance between Delta and JAL would increase business travel expenses for the 300 or so corporations it represents by limiting competition on flights between the United States, Japan and the rest of Asia.

Delta and American are both eager to invest in JAL to gain access to its network across fast-growing Asian markets and to establish a stronger foothold in Japan following the expansion of Tokyo's Haneda airport in 2010.

They have also said they would seek anti-trust immunity under the "open skies" treaty to liberalise air travel between the US and Japan. Such partnerships would allow airlines to work closely on pricing and scheduling to boost revenues and cut costs.

Mitchell said it is almost certain that US regulators would not approve immunity for Delta and JAL as they alone would control more than 60 percent of the US-Japan market. This echoes American's argument against Delta and JAL.

Delta has argued that it would be able to get approval.

"The only advantage in this open skies agreement for JAL is if it successfully achieves anti-trust immunity. Going with Oneworld virtually assures that, going with Delta almost guarantees it will not happen," Mitchell said.

Mitchell said the BTC has influenced several regulatory decisions in the past, including its role in fighting a distribution scheme pushed by American Airlines in 2006.

Mitchell said he has not been paid any fee from American and is not on retainer for the airline.

If Delta and JAL were granted anti-trust immunity, the BTC would work with other advocacy groups to petition the US Congress and lobby the Department of Justice to reverse the decision, Mitchell said.

US carriers United Airlines and Continental Airlines, and Japan's All Nippon Airways, partners in the Star Alliance grouping of airlines, have also said they would apply for antitrust immunity.