American says TPG could invest in struggling JAL

By Nathan Layne and Nobuhiro Kubo

TOKYO (Reuters) - Private equity firm TPG Capital could partner with American Airlines on a minority investment in Japan Airlines to prevent its defection to a rival airline group, the chief financial officer of American parent AMR Corp said.

The emergence of TPG as a potential investor comes as the loss-making Japan Airlines seeks its fourth state bailout since 2001, saddled with $15 billion in debt, a massive pension deficit and dozens of unprofitable routes.

The Japanese government pledged on Tuesday to enlist a state bank to offer bridge loans to prevent the airline from running short of cash and said it may introduce legislation to cut a pension shortfall that hit $3.7 billion in March.

Even as it struggles to avoid bankruptcy, JAL is being wooed separately by American Airlines and Delta Air Lines, which are keen to gain access to JAL's network in Asia and a stronger foothold in Japan. JAL is Asia's largest carrier by revenues.

AMR's Thomas Horton said TPG, which helped fund Continental Airlines emergence from bankruptcy in 1993 and backed a failed takeover attempt for Australia's Qantas Airways in 2007, has agreed to potentially invest in JAL as part of any deal with American Airlines.

"As appropriate and if it were welcomed by Japan Airlines and the government of Japan, TPG could also be part of a comprehensive recovery plan," Horton told reporters in Tokyo.

"They have been active in the airline space over the years."

A spokesman for TPG in Tokyo declined to comment.