JAL to stay with American, end Delta talks: source

TOKYO (Reuters) - Japan Airlines Corp <9205.T> will keep its partnership with American Airlines in the Oneworld alliance due to concerns that forging ties with rival suitor Delta Air Lines would make it difficult to achieve a quick turnaround, a source with knowledge of the matter said.

Delta and American have been courting JAL, now bankrupt, for months with offers of financial aid and close cooperation on international routes, looking to gain access to its vast network in Asia and benefit from the expansion at Tokyo's Haneda Airport.

Prior to its filing for bankruptcy protection last month, JAL was leaning toward Delta and its Skyteam alliance, attracted by the potential for cost cuts offered by Delta's strong network in Asia, sources had said.

But JAL's new management team and a state-backed fund supporting the carrier has decided that switching alliances would be too risky and could hinder the fund's plans to exit its investment in three years, the source said.

JAL joined the Oneworld alliance in 2007. Oneworld is one of three major alliances which pool frequent flyer miles and ferry passengers between partner airlines. Switching alliances would require JAL to change computer systems and would likely have caused it to lose revenues during a transition period.

Still, one analyst said Delta would have been the better choice.

"There's no question that Delta would offer JAL more long-term benefits. But JAL's new management probably saw more value in stabilizing the company's business from a short-term perspective," said airline analyst Kotaro Toriumi, who also teaches at Josai International University.

"Staying with American will not change anything for JAL."

JAL, which filed for bankruptcy with about $25 billion in debt, will make an official announcement of its plans to stay with American on Tuesday, said the source, who asked not be named ahead of the announcement.

A JAL spokesman said nothing has been decided on the matter.

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Desperate to keep JAL from defecting to Skyteam, executives from other Oneworld group carriers such as British Airways , Cathay Pacific Airways <0293.HK> and Qantas Airways have also stressed their commitment to support JAL.

American and its Oneworld partners had offered $1.4 billion in capital to counter a $1 billion financial aid package from Delta.

But the state-backed fund, the Enterprise Turnaround Initiative Corp of Japan (ETIC), is planning to put 300 billion yen in fresh capital into JAL and does not plan to take capital from an overseas carrier.

JAL and American plan to apply for anti-trust immunity soon, the source said.

Anti-trust immunity allows airlines to work closely on pricing, flight scheduling and in other areas to boost revenue and lower costs. This is now a possible under the "open skies" treaty recently agreed to by the United States and Japan.

American Airlines has argued that U.S. regulators would not approve immunity for a Delta and JAL relationship as they alone would control more than 60 percent of the U.S.-Japan market, hindering competition. (Additional reporting by Mariko Katsumura; Editing by Edwina Gibbs)