American-JAL ‘virtual merger’ to target Chicago

By Julie Johnsson
Posted Jan. 11 at 5:39 a.m.

American Airlines and Japan Airlines plan to launch a new joint venture for trans-Pacific flying this spring, coordinating schedules to make it easier for travelers to catch international flights in Chicago, Dallas and Los Angeles.

The moves underscore Chicago’s importance as a gateway for travel to northern Asia and are intended to boost passenger loads for JAL’s flights as the carriers begin to divvy up costs and share revenues on trans-Pacific routes, executives said.

Starting March 27, Japan Airlines flights will depart from American’s hub at O’Hare International Airport’s Terminal 3 rather than the airport’s international terminal, the carriers announced Tuesday.

American, meanwhile, is reworking its summer flight schedule to provide a larger number of connecting flights for passengers heading to Japan via Chicago and the Texas-based carrier’s other hubs.

By spacing out departure times for flights to Japan and tweaking its domestic schedule, American will enable customers on 44 flights from 42 points in North America to catch Japan Airlines’ daily Chicago-Narita flight within two hours of arriving at O’Hare. This is an increase of 22 flights and 20 destinations from the current schedule.

“Today is an exciting beginning and our goal is to deliver the choice and convenience our customers want,” said American Airlines president Tom Horton at a press conference in Tokyo, Tuesday.

While United and Delta Air Lines have struck mega-deals to expand their global presence, American is relying on a series of lower-risk “virtual mergers” with its Oneworld alliance partners to give it greater reach across the Atlantic and Pacific oceans.

American unveiled a similar partnership for trans-Atlantic flights with British Airways on Oct. 1, the same day that United closed its merger with Continental Airlines. Chicago-based United, meanwhile, is plotting a close partnership for Asian flying with Japan’s All Nippon Airways.

Once fierce competitors, American and JAL received antitrust immunity to set prices and share revenues on flights between the U.S. and Japan last fall, and antitrust immunity for the partnership was also a condition of a 2010 Open Skies Treaty between the U.S. and Japan.

The two Oneworld carriers will initially divvy up revenues on 10 routes between the U.S. and Japan that currently generate about $1.5 billion in revenues. They plan to eventually expand the partnership to share revenues on flights from Chicago and Los Angeles to Shanghai and Beijing, provided they obtain approval from U.S. and Chinese regulators.

Japan Airlines and American currently codeshare on 123 flights, jointly selling seats on the flights regardless of which of the carriers operates them. That number is expected to gradually increasing in coming months to give JAL a presence in markets like Salt Lake City and Sacramento.

On Jan. 27, American will begin codesharing on JAL-operated flights between Tokyo’s Haneda Airport and Singapore and Hong Kong. American plans to place its code on Japan Airlines’ domestic flights starting in March, provided Japanese regulators grant approval.

The giant global partnerships are largely uncharted territory for carriers and the effects on competition and pricing remain to be seen. With Atlantic flights now dominated by the three global marketing alliances, one of the last independent carriers, Virgin Atlantic, has said it is mulling merger options because of the very difficult competitive environment.

Also unknown is whether former competitors will be able to set aside past animosity as they pool resources and revenues, and whether the virtual mergers will provide the gains that participating carriers anticipate, analysts said.

United has said it expected to take a $100 million accounting charge during the fourth quarter 2010 related to its trans-Atlantic joint venture with merger partner Continental and Star Alliance partners Air Canada and Lufthansa. Continental performed better than expected during the first nine months of the venture and must put money back into the pool under the complicated revenue-sharing arrangement struck by the carriers.

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  1. rrob Jan. 11 at 10:16 a.m.

    It’s about time there was some coordination of schedules – I’m tired of 6 hour layovers in Narita. Why no metion here of Cathay Pacific’s service direct Chicago to Hong Kong starting Sept. 1? That will be the business class 1st choice for HK and beyond.

  2. Blu Jan. 11 at 8:01 pm

    Ir’s good anytime an Asian transpacific carrier is available as compared to any US carrier. Their fleet, amenities and service are head and shoulders above the crap “service” that is offered by UA, AA and DL elderly and obese crews…