onWorldAmerican Airlines has upped the ante in a bidding war with rival Delta Air Lines for a stake in Japan Airlines, which is teetering on the verge of bankruptcy.

American Airlines and its partners lifted their proposed investment in Asia’s biggest carrier to $US1.4 billion ($1.5 billion), from a previous offer of $US1.1 billion ($1.2 billion), the US carrier announced at a Tokyo news conference today.

In addition, they will guarantee $US2 billion in revenue over the next three years if JAL stays in the oneworld alliance.

American has teamed up with its Oneworld alliance partners – among them Qantas – and private equity company TPG to woo JAL, which has also been offered a $US1 billion financial package from Delta, the world’s largest carrier.

American and Delta are competing to tie-up with JAL and increase their share of the lucrative Asian market.

‘‘This proposal demonstrates Oneworld’s extraordinary commitment to JAL,’’ American Airlines executive vice president Thomas Horton said in the statement. ‘‘It brings stability and certainty to Japan Airlines at a time when it is most needed, as it faces turbulent times over the coming weeks and months.’’

Delta, which belongs to the SkyTeam airline alliance, is seeking to lure JAL away from the Oneworld grouping.

JAL delisting?

JAL shares dived almost 45 per cent in early trade on Tuesday, battered by deepening fears that investors will see their stakes wiped out under a widely expected bankruptcy filing.

Media reports said that the debt-ridden airline is likely to be delisted from the Tokyo Stock Exchange.

JAL, which lost about $US1.5 billion in the six months to September, is seeking its fourth government bailout since 2001 to enable it to keep flying in the face of mounting debts.

Hatoyama, who ended half a century of near-continuous rule by the LDP last year, declined to comment on the possibility of JAL being delisted when speaking to reporters today in Tokyo. The government has previously said that JAL, unprofitable in three of the last four years, will continue flying. JAL spokeswoman Sze Hunn Yap declined to comment.

All Nippon Airways, Japan’s No.2 carrier, rose as much as 7.4 per cent in Tokyo trading, the most since July. Skymark Airlines Inc., the nation’s largest discount carrier, jumped as much as 21 per cent.

Delta Air Lines and AMR Corp.’s American Airlines, which are competing to invest in Tokyo-based JAL, both said last week that a bankruptcy wouldn’t deter them as they want access to the airline’s networks in Japan and China. AMR Corp.’s American will meet the press today at 2 p.m. in Tokyo to discuss its plans, according to a statement.

Travel slump

JAL, which has at least 1.5 trillion yen ($18 billion) of liabilities, has struggled because of competition from All Nippon, Skymark and bullet trains. Worldwide international air travel also likely fell about 4.1 per cent last year, according to the International Air Transport Association, as the global recession sapped demand.

”Japanese airlines haven’t been doing well for a long time,” Tan Teng Boo, who oversees $US300 million as managing director at iCapital Global Fund, said from Singapore. ”They need some form of catalyst.” Tan said he has never owned JAL shares.

The global recession also caused General Motors Corp. and Chrysler to seek bankruptcy as consumers pared spending on job concerns. Mesa Air Group, which operates flights for major US carriers including Delta and UAL Corp.’s United Airlines, filed for Chapter 11 bankruptcy in the US earlier this month.

Restructuring plan

Under the proposed restructuring plan for JAL, Enterprise Turnaround Initiative of Corp. of Japan, a state-affiliated fund, will provide 300 billion yen of capital to JAL and a 400 billion yen credit line, the Yomiuri newspaper said last week. Creditors will be asked for about 350 billion yen in debt waivers and debt-for-equity swaps, the report said. An Enterprise Turnaround spokesman declined to comment.

The carrier plans to shed 13,000 jobs during a three-year restructuring by offering early retirements and shedding units, the Nikkei said today, without citing anyone. Haruka Nishimatsu, 62, chief executive of JAL since 2006, has already said he will step down.

JAL’s four biggest lenders, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, Mizuho Financial Group and state-owned Development Bank of Japan were owed 429 billion yen at the end of March, according to the carrier.

JAL previously won emergency loans from Development Bank under LDP administrations following the Sept. 11 terrorist attacks in 2001, the 2003 SARS outbreak and again last year as Japan suffered its worst postwar recession.

GM, the largest U.S. automaker, filed for Chapter 11 bankruptcy in June with $US172.8 billion of liabilities. A US government-backed restructuring allowed a smaller automaker to re-emerge the following month with about $11 billion in US debt and a focus on fewer brands.

Bloomberg News, with Reuters