Japan Airlines, JAS Reported Near Merger

Two of Japan’s largest airlines are close to a merger that would create the world’s No.6 carrier in terms of annual passenger miles flown, news reports said Sunday.

Japan Airlines Inc., the world’s eighth-largest airline, and regional carrier Japan Air System Inc. plan to merge their operations under a holding company in the fall of 2002, the Nihon Keizai financial daily reported, without citing sources. They hope to finalize the deal by the end of this year and have it approved by shareholders next June, the newspaper said.

Other Japanese news media carried similar reports Sunday.

JAL spokesman Geoffrey Tudor said earlier today that the companies are discussing a merger but couldn’t say when an agreement might be reached.

JAS spokesman Teichi Murayama said that the two airlines, which have cooperated in business tie-ups in the past, were discussing methods of making their management more efficient, but said he was unaware of any merger talks.

He declined to speculate on the Nikkei’s assertion that a merger would create the world’s sixth-largest airline, adding that he believed the ranking may have been based on outdated information.

The merger would be the first realignment in the Japanese airline industry in 30 years and give the new company 48% of the domestic market at a time that prospects for a recovery in international travel remain uncertain, the Nikkei said.

Japan Airlines is the nation’s leading international carrier, but its 25% share of the domestic market is only half that of Japan’s No.2 airline, All Nippon Airways Co.

Japan Air System, a regional carrier that serves other destinations in Asia as well as the country’s main domestic routes, was formed by a merger in 1971. It has been hard hit by Japan’s decade-long economic slump.

The companies cooperate on cargo services, domestic shuttle service and other cost-saving ventures, JAL said in a statement. JAL owns 8.25% of JAS, the statement said.