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Japan Airlines spurns alliance offer from Delta

TOKYO — Japan Airlines, wooed for months by Delta Air Lines with promises of cash and global reach, spurned the world's biggest carrier and opted to keep its alliance with American Airlines.

The Japanese carrier said Tuesday that it will strengthen its partnership with American. The two airlines will jointly seek government approval to work closer together to coordinate schedules on trans-Pacific flights, share revenue and carry each other's passengers — all moves that can boost profits.

The decision brings to an end a fierce tug-of-war over Japan's ailing flagship carrier, which is restructuring under bankruptcy.

The prize: JAL's Asian routes and the premium passengers that come with them. For American, that means a potentially bigger revenue stream, more power to help shape overseas customer options and the potential to one day fly its own aircraft and passengers on JAL's routes.

A joint venture — for which JAL and American must secure antitrust immunity — allows airlines to share costs and revenue on certain flights, regardless of which airline owns or flies the aircraft. It differs from a code-sharing agreement, where one airline bears all the costs but another airline might get a share of the revenue for booking a customer on a flight.

Delta has a joint venture with Air France-KLM across the Atlantic. Delta wanted to complement that with a similar venture with Japan Airlines across the Pacific.

But the regional dominance of a JAL-Delta tie-up would likely have raised concerns among antitrust regulators about unfair competition and made approval of a venture difficult.

Delta, based in Atlanta, and its SkyTeam alliance currently control 30 percent of U.S.-Japan market share. That would have increased to 54 percent if JAL had joined SkyTeam. American and its oneworld alliance partners would have seen their share drop from 35 percent to 6 percent without JAL. The Star alliance, which includes United Airlines, Continental Airlines and All Nippon Airways, has 31 percent of U.S.-Japan market share.

Delta and its partners offered JAL $1 billion to leave oneworld. American and its partners offered JAL as much as $1.4 billion to stay. JAL decided not to accept any cash.

American, based in Fort Worth, Texas, and its oneworld partners plan to deliver to JAL roughly $2 billion in ongoing and incremental revenue over three years.

Delta asserted it remains a big player in Asia.

The Centre for Asia Pacific Aviation, a Sydney-based aviation research group, said American stood to lose more than Delta, which already has a significant presence at Narita Airport outside Tokyo. American never estimated the income it would have lost without JAL and Delta never said how much it would have gained. But American transfers roughly 400,000 passengers annually to Japan Airlines at Narita.