BA makes a bid for Japan Airlines

Japan Airlines is on the brink of financial collapse; now, in an effort to rescue the corporation, it is believed that leading UK airline British Airways is joining Qantas and American Airlines in a three-strong investment consortium bidding for a takeover.

According to reports in today's edition of British newspaper The Times, the troubled Japanese carrier is now fielding "at least two serious rescue proposals."

The report goes on to reveal that the proposals also involve a significant injection of capital by foreign airlines, with other proposals believed to be from Korean Airlines and Air France-KLM.

It is now believed that, earlier in the week, representatives from both BA and its Australian and US cohorts visited JAL's Tokyo headquarters, coinciding with Japan's new Democratic Party (DPJ) being sworn-in.

The juxtaposition is interesting, especially considering the DPJ is extremely unlikely to allow injections of public money as a solution to JAL's woes, unlike its predecessor.

So can BA prosper? Well, things are shaping up to be quite interesting, especially considering the BA offer is thought to involve debt guarantees, providing consulting services and restructuring advice, and more code-sharing deals. It is not expected that BA will directly offer cash.

Meanwhile, American is thought to be considering a cash injection in return for a stake that could make it JAL's largest shareholder and Japanese government insiders have already said the prime goal is now to prevent JAL falling into bankruptcy - in other words, reports The Times, the company is now effectively obliged to consider any offers of investment.

The rehabilitation of JAL, which has already (remarkably) been allowed to operate with huge deficiencies, poses a severe political challenge to the new administration of Prime Minister Yukio Hatoyama, who was only inaugurated on Wednesday.

18/09/09

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