Asia's Largest Airline Lost $1 Billion Last Quarter

American and Delta Airlines are both eyeing an investment in Japan Air Lines, Asia's largest carrier in terms of revenue. The airline, which lost approximately $1 billion in the 2nd quarter of 2009, hopes to secure a government-backed 100 billion yen credit line. That is putting pressure on the airline to raise cash and cut costs.

American and JAL are both members of the Oneworld air alliance, and Reuters reports that AA is looking to increase ties with the troubled carrier, as well as block any move to a rival network. AA is reportedly in talks to invest in JAL, as well as forming a  joint venture with the airline.

Delta, meantime, is a member of the SkyTeam group along with Air France-KLM, Korean Air and Russia's Aeroflot. Delta is also exploring an investment in JAL, which, if successful, could shut American out of the Japanese market, according to Yoshihisa Miyamoto, and analyst with Okasan Securities. The second-largest Asian carrier, All Nippon Airways, is already a member of The Star Alliance. "Considering how desperate American is, it's likely that they'll offer more than what Delta has been reported as ready to spend," Miyamoto told Reuters.

The Japanese media has been reporting that Delta was considering a 50 billion yen infusion of cash into JAL, but is asking for an exclusive code-sharing arrangement.

All the negotiations are taking place before a backdrop of "Open Skies" negotiations between the U.S. and Japan, which would open the door to more cooperation on flight scheduling and profit sharing.

FMI: www.aa.com, www.delta.com