Bidding War Between American Airlines and Delta Air Lines Heats Up

The bidding war between American Airlines and Delta Air Lines is just about to start heating up. This news comes just after American Airlines said that it was going to step up its bid to $1.1 billion for Japan Airlines to stay with the Oneworld alliance.

Much of the money that American Airlines is offering is being fronted by TPG, a private equity group. However, Delta Air Lines and its Skyteam alliance will not let Japan Airlines go without a battle. Delta Air Lines is prepared to offer Japan Airlines $500 million in new equity and $500 million in asset backed financing and compensation if the airline will jump ship and go to Skyteam alliance.

Both American Airlines and Delta Air Lines are very keen on getting Japan Airlines to be in their groups. This is because both airlines want to get a stronger foothold in the Far East. The big push for this now comes just before a new open skies deals between the United States and Japan is expected to come into play next year.

However, Japan Airlines has a lot of things to worry about right now. In fact, the carrier has racked up more debt than any other airline in the world. Right now it has 130 billion yens of debt. Of course, the airline will also have to win approval from the Japanese government. Right now the government is trying to turn Japan Airlines around by using its Enterprise Turnaround Initiative Corporation. This group is able to tap into about 1.6 trillion yens in state guaranteed funds. However, it remains to be seen how much Japan Airlines can get.