Japan Airlines (JAL) and Japan Air System (JAS) are to merge, creating the world's sixth-largest airline by revenue passenger kilometres. Together they will control 48% of the domestic market, roughly equal to that of All Nippon Airways (ANA), which has a much smaller international network than JAL.
JAL's international business has suffered since the 11 September attacks, and the airline now plans to expand its domestic presence where traffic has held up.
If the deal is approved by shareholders and regulators, a joint holding company should be established in September 2002. The airlines will be fully merged in early 2004. JAL already holds an 8.25% stake in JAS and is its second-largest shareholder after rail company Tokyu Corp, which owns 30%.
JAS president Hiromi Funabiki will be chairman of the new holding company, while JAL president and chief executive Isao Kaneko will be president. The new company's name has yet to be decided.
The airlines say present bilateral alliances will not be affected. JAL has partnerships with 19 airlines, including most members of Oneworld, while JAS has codeshare partnerships with a handful of international carriers including KLM, Northwest and China Southern.
A merger between the number one and number three Japanese carriers has long been seen as a good fit - JAL focuses on international routes, while JAS has only a limited overseas network, to mainland China, Hong Kong and South Korea. JAL and JAS have been co-operating further, including a Tokyo-Seoul codeshare.
While ANA has been silent since the announcement, some analysts say the deal could spur consolidation among the country's other carriers. Skymark Airlines and Air Do have recently struggled and could be potential partners or take-over targets for ANA. The deal is the first major shake-up of Japan's industry since 1971, when TOA Domestic Airlines and Japan Domestic Airlines merged to form JAS.
JAL reports a 61% drop in net profits for the six months to 30 September and forecasts net losses of ¥40 billion ($328 million) for the full year to 31 March. Net profit fell to ¥16.39 billion for the first half, operating profit fell 45% to ¥38.95 billion while pre-tax profit was also down 45% to ¥21.75 billion. Operating revenue was down 0.3% to ¥871.25billion.
Source: Flight International
