It is a dismal reflection on the media when an imprecisely defined package of so-called benefits to the creaking fiscal basket case that is Japan Airlines is headlined as a $US 2 billion rescue package with a significant Qantas contribution.

This nonsense results from the cutting and pasting of this absurd press release .

Note that in Part 1 of the press release (below) the $2 billion consists of $1.5 billion in ‘ongoing revenue that JAL realizes from oneworld today’ from its participation in the Oneworld marketing alliance. Wow, the Japanese will never notice we are giving them something they already have as members.

part one

This is just an incredibly loosely defined nebulous $500 million dollar package, if the empty words about $300 million in ‘incremental revenue guarantees’ from AA mean anything bankable, or whatever the $200 million in ‘enhancements’ from BA actually comprise.

Can we please deal with the reality here? Japan Airlines is precisely the sort of failed airline that the managements of the four main parties to Oneworld; Qantas, British Airways, American Airlines and Cathay Pacific, have for several decades eloquently argued should pay the price of commercial failure and die.

I have sat across the desk from Colin Marshall, Bob Ayling, James Strong, Geoff Dixon, Rod Eddington and Tony Tyler and listened to them persuasively put the case that government intervention and the misuse of bankruptcy laws are impediments to fair competition, level playing fields, and even in moments of generosity, the consumer interest.

And now, as Japan Airlines prepares to be saved by a massive government bailout in Japan, all of its Oneworld partners are talking up hard-to-quantify aid, revenue guarantees, and other assistance, to try and keep an airline they have all thrashed whenever they flew against it in their alliance rather than have it accept similarly vague but numerically attractive pitches from Delta and the Skyteam alliance to which it belongs.

Be clear about this. None of the Oneworld carriers are going to give anything which reduces their revenues by one dollar to Japan Airlines, they would all benefit by its demise, and Delta can’t or won’t save it either. The plan is undoubtedly to have Japan Airlines on permanent life support by Japanese taxpayers in some sort of harmless corner of the playground while they take as much business off it as possible.

There are a lot of reasons to question airline alliances in general, and the crisis that has finally caught up with Japan Airliners in particular, although American and British Airways aren’t in robust financial shape either.

Consider the Qantas section of this load of waffle.

part two

Jetstar is one of the reasons Japan Airlines looks vulnerable on its Australia routes. Is Rob Gurney, who is one of the sharpest knives in the Qantas kitchen, seriously suggesting that Qantas will help the Japanese run a second low cost brand without it being controlled by Qantas and called, let’s guess, Jetstar Japan?

And does Qantas really feel any commitment to Japan Airlines that would involve a transfer of real profits from it to them? If it ever does the board should be removed at the first opportunity.

The entire purpose of the moves by the Oneworld carriers and Delta to either retain or capture an alliance with Japan Airlines is to keep it in the trench it has dug for itself by failing to reform its operations and come to grips with the changes in air travel. That way the winner can hope to benefit from providing connecting services to Japan Airlines customers but even that isn’t guaranteed. Nobody can force a consumer to connect from Japan Airlines to an alliance partner in a market where on-line bookings and a smarter generation of travel chains can always offer price inducements to mix-n-match for different sectors of an itinerary.

Update January 13 : Shares in JAL fell to seven yen this morning, a drop of 81%, as investors headed for the exists in advance of an expected bankruptcy filing which would see its stock cancelled.


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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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