BA eyes deal for Japan Airlines

PUBLISHED : Friday, 18 March, 2011, 12:00am
UPDATED : Friday, 18 March, 2011, 12:00am

British Airways is eyeing the chance of a consolidation with the cash-strapped Japan Airlines (JAL) despite the latter's dimmed business outlook in light of the country's worst disaster in a century.

The route between London and Tokyo has been among the most profitable for British Airways, and Japan's recent earthquake and ensuing nuclear crisis has stifled passenger and cargo traffic, losing the airline even more than the impact of last year's snowstorm in Britain.

'We lost about GBP15 million [HK$188 million] a day during the snowstorm, while the labour strike cost us GBP20 million. As for the daily losses inflicted by the Japan earthquake, it was between that range,' said Sara Thorley, BA trade sales manager for Greater China and the Philippines.

However, the airline still considers Japan crucial for the development of its Asia-Pacific business. Already in partnership with Cathay Pacific, American Airlines and Qantas in the Oneworld Alliance, BA now hopes to complete a deal with JAL as well. American Airlines agreed a joint-venture deal with JAL in January.

The outlook for JAL - which has debt of 730 billion yuan (HK$864 billion) and was on the verge of going bankrupt - remained dim for the near future, said Thorley, but it usually took three to four years for a merger plan to generate returns. An aviation analyst who declined to be named agreed, saying JAL's downtime may provide an opportunity for a buyer considering a long-term investment.

British Airways' former chief executive Willie Walsh, who recently assumed the top job at the International Airlines Group - the holding company after BA merged with Spanish airline Iberia - said in January that IAG identified 12 airlines as potential targets for consolidation.

Thorley said the others included Kingfisher in India, and several airlines in China, Europe and Latin America - although talks with the latter were still at an early stage.

BA invested GBP100 million last year in renovating its first-class cabins. About half of its fleet will be fitted with the new cabins by the end of this month.