The land of the rising sun has become the land of the rising aviation interests over the last few months. As Japan Airlines (JAL) struggles to stay out of bankruptcy, it is being courted by two airline giants with opposing interests. The bidding war is heating up as Japan and the U.S. look to seal a deal on an Open Skies aviation pact that could bring more airline choices between the two nations. Who stands to benefit?

For Japan Airlines, the key is survival. The airline is moving toward reorganization with the help of a government backed enterprise. At the same time, Delta Air Lines has offered US$1 billion in new capital, revenue guarantees and financing for the struggling airline. American Airlines, partners with JAL in the Oneworld alliance, has offered the airline $1.1 billion through a third-party investment group. As the tug-of-war heats up, both airlines are wary of being too aggressive, thus giving the Japanese government reason to step in.

Delta Air Lines, as part of SkyTeam, has a larger presence in Japan and Asia than does American. A partnership with JAL could leave American without a partner in Japan because All Nippon Airlines (ANA) is already a member of the Star Alliance which also has a larger presence in Asia than American and its Oneworld partners. But there is another force at play that could alter the stakes of the game.

The United States and Japan are inching closer toward a bi-lateral Open Skies agreement that could increase airline access and competition between the two nations. Depending on the terms of the agreement, airports like Tokyo Narita International and Haneda Airport would likely see expansion and greater competition as carriers look to establish a stronger foothold in Asia. For airlines that lack a vast network in Asia, alliances are a must, and that's what makes it critical for American Airlines to keep JAL in Oneworld. If Delta swoops in and convinces JAL to switch to SkyTeam, the Oneworld alliance will have its presence in Asia greatly reduced.

Part of the Open Skies agreement talks will hinge on specific factors such as granting anti-trust immunity to carriers so that they can form partnerships and join ventures between the Japanese and U.S. markets. Competing airlines are also eyeing slots at Tokyo's major airports. If Delta fails to woo JAL to SkyTeam, the airline will not be happy if it cannot obtain additional slots at Tokyo's airports to compete with the other alliances, especially if they are granted anti-trust immunity to form stronger partnerships.

We've mentioned before that airline industry competition is shaping up to be a battle of alliances rather than individual airlines. Japan is but one of many fronts in the alliance battles to come. Hopefully, the end result will mean better service, choices and competition. If the U.S.-E.U. Open Skies agreement is any indication, it may take a while before we see the full benefits, especially during these tough economic times.

Also on this topic:

Japan, U.S. open the skies as AA opens its wallet in bid for JAL tie-up

Big in Japan: Airlines battle for stake in troubled JAL in clash of alliances