Japan Airlines Corp (JAL) plans to put on hold tie-up talks it has been holding separately with Delta Air Lines and AMR Corp's American Airlines, Japan's Kyodo news agency reported on Monday.
Delta and a rival group led by American Airlines have been in talks to invest in JAL and form closer ties with it, eyeing expansion in Japan and the rest of Asia. JAL is Asia's largest airline in terms of annual revenue.
However, Kyodo said that JAL has decided to focus first on putting together a restructuring plan with the government task force that is overseeing the airline's revival after the government backed a 100 billion yen ($1.11 billion) loan.
JAL, weighed down by $15 billion in debt and headed for its second straight annual loss, could resume talks with American and Delta after it has put its restructuring on a solid track, Kyodo said.
JAL spokeswoman Sze Hunn Yap said she could not verify the report and declined to comment further. American and Delta were not immediately available for comment.
The restructuring of JAL took a new turn in late August when the Democratic Party came to power in a landslide election victory, ending the rule of the Liberal Democratic Party, which had supported state help for the airline.
The Democrats have said JAL's restructuring plan, which includes cutting 6,800 jobs and eliminating 50 routes, did not go far enough and it assigned a task force to push through more drastic cost cuts.
JAL is seeking 250 billion yen in funding to carry it through the end of the financial year in March 2010 and it is widely expected that the state will have to give it a capital infusion to keep it afloat.
Both Delta and American have been courting JAL with the promise of an equity investment so they can gain access to promising routes in Asia, including those in Japan, where Tokyo's Haneda airport is undergoing a major expansion.
American teamed up with British Airways and Qantas Airways to keep JAL in the Oneworld Alliance grouping of airlines, sources told Reuters last month. They said that executives from all three carriers met with JAL in September.
Delta has been wooing JAL to join the rival SkyTeam alliance, sources have told Reuters. The media has reported that fellow SkyTeam member Air France-KLM was a potential partner with Delta for an investment in JAL.
Delta has offered to invest about 30 billion yen ($334 million) in JAL, Kyodo said.
(Reporting by Taiga Uranaka and Nathan Layne; editing by Hugh Lawson and Karen Foster)