American Airlines CEO Gerard Arpey Meets With Japan's Minister of Land, Infrastructure, Transport and Tourism to Reinforce American's Commitment to Japan Airlines
TOKYO, Dec. 16 /PRNewswire-FirstCall/ -- Editor's Note: Following are the prepared remarks of American Airlines CEO Gerard Arpey that were delivered today at a news conference in Tokyo, Japan, after a meeting with Seiji Maehara, Japan's Minister of Land, Infrastructure, Transport and Tourism (MLIT). (An audio replay of the news conference is available until 11:59 p.m., Saturday, Dec. 19, by dialing within the United States: 800-475-6701; or Internationally 612-365-3844; Access code 138529 for both numbers).
"Good afternoon. We appreciate all of you taking the time to be with us today. My colleagues and I are glad to be back in Tokyo to demonstrate our strong commitment to our partnership with Japan Airlines (JAL) and to reiterate our belief that JAL's future is best served by remaining our partner within the oneworld® alliance.
"I realize most of you are here to learn about our very productive meeting with Minister Maehara, and I will address that in a few minutes and leave plenty of time for your questions.
"I remember very clearly 15 years ago when American Airlines first cemented its relationship with JAL. At the time, I was the senior vice president in charge of planning, and I worked alongside our then-Chairman Bob Crandall and JAL's senior leadership to launch what has been a very important relationship for our companies. Even then we saw the value of airline partnerships in building a global network.
"These global ambitions were the driving force a decade ago behind the forming of the oneworld alliance, a collection of 11 of the finest airlines representing the highest standards in service quality and brand reputation around the world - names such as British Airways, Qantas, Cathay Pacific, Iberia, LAN, Finnair and Mexicana to name a few. Today, JAL is a valued and equal partner within oneworld, and in fact American Airlines sponsored JAL's membership in the alliance two years ago.
"Beyond our history together, American Airlines has a strong interest in seeing JAL succeed because JAL's success ultimately means success for American Airlines. In short, our interests are aligned. That is an important distinction that should matter to JAL and the government of Japan, and I will address that shortly.
"More specifically, we just concluded a very constructive meeting with Minister Maehara, who graciously allowed us to exchange ideas about the optimal path to a successful future for JAL and why we believe American Airlines and oneworld are the best partners to help make this happen.
"Overall, we explained that the proposal we have made - in conjunction with our oneworld partners and TPG -- offers JAL the best and most achievable path to success. It will create the best outcome, not only for JAL and its employees and investors but also the broader Japanese public and taxpayers, and air travelers between the U.S. and Japan and around the world.
A superior offer
"First, the total value of the proposition we have made is far superior than the proposed alternative, both in terms of commercial benefits and direct financial investment. If invited and welcomed by JAL and the government of Japan, we have offered a solution that would be an important piece of a successful restructuring plan. It will enhance JAL's opportunity for long-term success while also injecting a large amount of much-needed capital in the short term.
"We also offer JAL a team that has a strong track record of success in the airline industry. American Airlines has an 80-year history of integrity and meeting its obligations to its stakeholders. TPG is one of the world's leading private investment firms, with much success in the airline business. Any competing proposals should be first assessed on the basis of the track record of the parties behind them. The addition of TPG to our team is a strong endorsement that our proposal is superior and offers prospects for the future that are unrivaled.
"I will be happy to go into as much detail as you are interested in, but the bottom line is that our direct investment offer is worth more than twice to JAL as any other proposal. The difference is even greater when you consider the commercial implications of JAL exiting a superior global alliance with the strongest U.S. network for a less desirable global alliance and U.S. network. We estimate this would cost JAL hundreds of millions of dollars per year.
An achievable offer
"Second, our proposal not only delivers the most value, it is also achievable and has the most certain chance of success while creating the least risk for JAL and its employees and customers, and for the Japanese public and taxpayers. Specifically, a JAL-American Airlines combination can readily obtain antitrust immunity from the United States Department of Transportation, (DOT) which will be worth hundreds of millions of dollars to JAL in the future. We are confident that this will not be an option for JAL in any other alliance.
"An immunized partnership is critical to JAL's future, and time is of the essence. With the new Open Skies agreement in place, All Nippon Airways (ANA) will surely pursue immunity with United Airlines and Continental Airlines, all members of the Star Alliance. JAL must act quickly or risk losing ground as these competitors grow stronger, which could very well derail its restructuring.
"To suggest that JAL could achieve the benefits we've outlined with another partner is simply disingenuous, as the recent remarks of Former U.S. Secretary of Transportation Norm Mineta made very clear. The DOT's interest is in preserving and enhancing competition. Our proposal does that, and would result in a landscape of three alliances of roughly equal size battling in the U.S.-Japan market. That is the most favorable result for consumers, which are the DOT's highest priority, as well as for the countries involved and taxpayers.
Alignment of interests
"The third major point I want to emphasize is that our interests at American Airlines are aligned with JAL's. That is not and never will be the case with the other potential partner that has suddenly become interested in JAL's future at a time when JAL is most vulnerable.
"As I mentioned earlier, it is clear that American succeeds when JAL succeeds. Specifically, we both have an interest in seeing a successful U.S-Japan Open Skies regime, which will mean more opportunities for airlines to serve customers between the U.S. and Japan. It will also pave the way for a closer relationship between American and JAL through antitrust immunity, creating revenue and growth opportunities for our respective companies.
"At the same time, United, Continental and ANA are expected to become stronger through a similar partnership. You can clearly see why that outcome - tougher competition between the U.S. and Japan - would not be the desired outcome for some. It would be unfortunate if the ground breaking Open Skies agreement forged last week by our two countries were jeopardized by a tie-up that presents an uncompetitive dynamic across the Pacific.
"To better understand why American and JAL are the most natural partners, consider that our networks complement each other - they don't overlap. As a result, we each have a strong incentive to push as much traffic as possible onto the other's network. In fact, JAL is so central to our partnership that we have discussed with JAL a proposal that would guarantee it exclusivity as our sole partner in this region, assuring a strong JAL and Tokyo hub for the future.
"That is very different from the situation JAL will face if it leaves oneworld. For example, American doesn't have a hub in Japan or a hub in Korea that would compete for JAL's customers, siphoning important revenue and traffic from its network. Indeed, the competing offer would put JAL at risk of losing customers at a time when it can least afford it. Yet, it is also clear that a withered, marginalized JAL would significantly benefit SkyTeam's immunized hub in Seoul. That is not a risk that JAL, nor the government of Japan, should take.
"In conclusion, we have offered JAL a total value proposition that is superior in every way to the alternative. It offers far more commercial and financial benefits, far less risk and the best chance for JAL to achieve long-term success. Those are also the benefits that will lead to the best outcome for the traveling public and taxpayers, employees and investors, and the Japanese tourism and aviation industries.
"Thank you again for your time."
About American Airlines
American Airlines, American Eagle and AmericanConnection® serve 250 cities in 40 countries with, on average, more than 3,400 daily flights. The combined network fleet numbers more than 900 aircraft. American's award-winning Web site, AA.com®, provides users with easy access to check and book fares, plus personalized news, information and travel offers. American Airlines is a founding member of the oneworld® Alliance, which brings together some of the best and biggest names in the airline business, enabling them to offer their customers more services and benefits than any airline can provide on its own. Together, its members serve nearly 700 destinations in more than 130 countries and territories. American Airlines, Inc. and American Eagle Airlines, Inc. are subsidiaries of AMR Corporation. AmericanAirlines, American Eagle, AmericanConnection, AA.com, We know why you fly and AAdvantage are registered trademarks of American Airlines, Inc. (NYSE: AMR)
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