Japanese newspaper Asahi reports that Japan Airlines will announce shortly that it has chosen to remain in Oneworld®, the alliance that it currently shares with partners American Airlines and British Airways. Will this help competition in Japan and Asia?

Japan Airlines is cutting airplanes, routes and jobs as it looks to reorganize under bankruptcy. But the airline's most attractive value is not in the assets it is shedding, but in its place as a strategic gateway to Asia for at least two major airline alliances. Over the last several months, Delta Air Lines, a member of SkyTeam®, and American Airlines, part of Oneworld, have been offering billions of dollars to Japan Airlines. SkyTeam would love to lure JAL away from Oneworld in order to bolster access to Asia from key Japanese airports, particularly for Delta, already the world's largest airline. Such a move would also keep competition at bay since Oneworld depends on JAL to funnel passengers beyond Japan throughout Asia and would stand to lose the most from a defection.

Reports in late January indicated that Delta and SkyTeam had emerged as winners in the battle to partner with JAL, however such reports proved to be premature. JAL and Delta cover many of the same routes and an alliance with SkyTeam could allow both airlines to achieve greater efficiency by coordinating fares and schedules. Essentially, the more efficient carrier would operate the routes and both airlines would reap the financial rewards. For this to happen, however, the airlines would need anti-trust immunity and would have to pay penalties to Oneworld. However, with new leadership, JAL has decided to take a fresh look at the offers from both alliances and speculation favoring one alliance over another continues to shift. Now, it's Oneworld's turn.

For its part, Oneworld and American Airlines have offered JAL US$1.4 billion to remain in the alliance. Given the upcoming signing of a U.S.-Japan Open Skies treaty later this year, obtaining anti-trust immunity for pricing and scheduling coordination may be easier for JAL and its Oneworld partners than it would be for JAL under a new alliance with lesser known entities. JAL's new management feels that leaving the current alliance may be too great a risk and could hinder the airline's ability to turn its fortunes around.

As Asia emerges as the world's largest travel market, the focus will be greater on this region of the world. The battle over Japan Airlines shows that the stakes are high. Asian markets have potential for dramatic growth and when the industry recovers from horrendous revenue losses and passenger declines, the giant airlines in each alliance will be looking to make sure that they are in the right place at the right time. Alliances can open up new markets to air travellers, but as they grow and expand, we'll all be watching to see if they wind up closing markets to new competition in the process.