Shares of Japan Airlines jump on link-up rumors

Officials at Japan Airlines (JALSY) aren't acknowledging rumors swirling about link-ups with other airlines that could infuse Asia's largest airline with some much-needed cash. But traders in Japan on Monday, evidently giddy over the prospect, sent shares soaring.

Shares of JAL jumped 8 percent in Tokyo trading Monday following three days of speculation that the money-losing airline might sign deals with Delta Air Lines, American Airlines and Air France-KLM that would result in JAL receiving hundreds of millions of dollars. JAL shares ascended even as the Nikkei 225 stock index fell more than 2 percent to 10,202, pushed lower by the U.S. dollar, which fell to a seven-month low against the yen.

But JAL management said Monday that speculation in the media about linkages with foreign carriers aren't based on any such statements from the company and that no decisions have been made. On Friday, JAL said it was looking into tie-ups with various partners, but that nothing had been decided.

JAL officials are devising an overhaul of the company's business and are seeking an infusion of 250 billion yen ($2.8 billion) from multiple partners, including banks, investment firms and airlines, including Delta, according to the Nikkei news agency. JAL's turnaround plan, anticipated by month's end, is expected to include measures such as cutting pension benefits, and route, payroll and equipment reductions.

Delta (DAL), the world's largest airline, is considering infusing JAL with as much as $300 million dollars, according to a person briefed on the matter, the Associated Press reported. In return for its investment, Delta would take a stake in JAL, gain access to the airport closest to Tokyo's business center and expand its presence in the Far East nation, AP reported.

Then there's American Airlines, a unit of AMR Corp. (AMR) , which may be ready to invest more than $1 billion in JAL. A link-up with Delta or American would give the winning airline access to more Japan cities and give it the ability to sell seats on JAL flights, reported. Alliances such as Oneworld and SkyTeam, which includes Delta and Air France-KLM (AFLYY), let airlines expand their networks by pulling in more passengers and sharing revenue at lower costs, the news agency said.

JAL reported a 99 billion yen ($1 billion) quarterly loss earlier this year. The airline expects to lose 63 billion yen in its current fiscal year, which ends in March. At the end of June, the airline received a 100 billion yen credit line from a consortium of lenders with a portion of the amount guaranteed by the Japanese government. In exchange, JAL has temporarily come under the supervision of Japan's Transport Ministry.

At the time, it was believed JAL would need an additional 100 billion yen by March to shore up its restructuring plan. That estimate has now risen to 250 billion yen, as costs such as trimming routes and payrolls have ballooned.
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