INTERVIEW:Air France CEO:Delta's JAL Plan Is Preliminary Offer
By David Pearson, Of DOW JONES NEWSWIRES
PARIS -(Dow Jones)- A $1.02 billion offer of help by Delta Air lines (DAL) and
its SkyTeam partners for ailing Japan Airlines Corp (JALSY, 9205.TO) is only a
preliminary proposal and any outcome will depend on discussions with JAL and the
Japanese government that still to take place, the chief executive of Air France-
KLM (AFLYY, AF.FR) said Wednesday.
"It's a way to respond to other proposals made by American Airlines," Pierre-
Henri Gourgeon, chief executive of the Franco-Dutch airline, told Dow Jones
Newswires.
The Delta proposal would challenge a plan on which AMR Corp.'s (AMR) American
Airlines, a member of the Oneworld alliance, is working. American has teamed up
with private equity firm TPG to develop an alternative funding plan for JAL.
"We can only be more precise when the Japanese government and JAL decide to
discuss this subject in greater detail, and that time hasn't come yet" Gourgeon
said on the sidelines of a presentation of Air France-KLM's first-half results.
The Delta proposal calls for a $1.02 billion funding package for JAL in a bid
to woo the Japanese carrier away from its affiliation with the Oneworld airline
alliance.
The proposal by Delta and SkyTeam includes a $500 million equity injection
from SkyTeam, a $300 million revenue guarantee from Delta and a further $200
million in asset-backed funding, as well as $20 million or more in transition
costs for the switch.
Gourgeon said that any eventual contribution by SkyTeam wouldn't necessarily
be split equally among the SkyTeam partners. "All it means is that certain
members of SkyTeam have accepted to invest," in JAL.
"The answer to the question of whether foreign investment in JAL is welcome
isn't known yet," Gourgeon observed.
Philippe Calavia, Air France-KLM's chief financial officer, said separately
that JAL's real capital requirement "is in the billions of dollars."
"I fear that a reasonable effort for us will be much lower than the real needs
of JAL," Calavia commented. "JAL needs to be recapitalized, and we're talking
about billions of dollars here. We're not going to talk to them about a change
of alliance simply to recuperate several hundreds of millions of dollars when we
need billions."
Calavia noted that the Delta financing package is more like a structured
financing operation than a straight cash injection for JAL.
Gourgeon said Air France-KLM wouldn't have a problem making a cash
contribution as it's sitting on EUR5 billion of net cash. "But the problem is
that when you pay out cash, you like to get it back," he added.
-By David Pearson, Dow Jones Newswires; +33140171740, david.pearson@
dowjones.com
(Dan Michaels of the Wall Street Journal contributed to this article).
(END) Dow Jones Newswires
11-18-091540ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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