Shares of Japan Airlines Corp. surged Monday amid speculation that American Airlines and Delta Air Lines are vying to buy stakes in the money-losing carrier.

Under a major restructuring plan, the airline known as JAL is looking to raise $2.8 billion US from banks, investment funds and airlines, including Delta, according to the Nikkei financial daily.

Japan's largest airline said in a statement Monday that media reports of tie-ups with foreign carriers are not based on official information from the company and that nothing has been decided.

JAL stock soared almost eight per cent to 176 yen on the Tokyo Stock Exchange, beating a sharp slump in the overall market.

American Airlines is reportedly seeking a deal with distressed Japan Airlines. (LM Otero/Associated Press)

The Nikkei 225 stock average tumbled 2.3 per cent to 10,202.06 as the dollar fell to a seven-month low against the yen.

Company losses

Hit by plummeting demand amid a slumping global economy and swine flu fears, JAL incurred its biggest-ever quarterly net loss of $1 billion for the three months ending June 30.

Delta is in preliminary discussions about buying a stake in JAL for about $300 million. The U.S. airline giant could become a leading shareholder in JAL and get coveted access to Haneda Airport, close to Tokyo's business district, according to a person briefed on the Delta situation.

The talks between the two carriers are in the preliminary stage, and it is unclear what form a partnership between Delta and Japan Airlines might take.

Some analysts have said the move would make sense for Delta and help expand its position in a key market like Japan. But others question why Delta would want to use its cash to make an investment in Japan Airlines.

The Nikkei said Delta has offered to invest as much as $550 million, which would give it an 11.2 per cent stake in JAL.

American interest

Delta's rival American Airlines is also negotiating a possible investment, according to a person familiar with the talks. American would like to form a joint business venture with JAL, in which the two carriers would seek antitrust immunity to work closely in setting schedules and prices for service around the world, according to the person, who spoke over the weekend on condition of anonymity because of the sensitive nature of the talks.

American and JAL already have a so-called code-sharing agreement in which they sell seats on each other's flights. If they won immunity from antitrust laws, they could co-operate in setting prices and schedules. For example, instead of each operating a Chicago-to-Tokyo flight around the same time, they could stagger the flights to maximize traffic while splitting the revenue.

Delta doesn't have a Japanese partner. A Delta-JAL hookup would raise doubts about JAL's ability to remain in oneworld, an alliance of airlines that includes American and British Airways. Delta is in another alliance, called SkyTeam, which also includes Air France-KLM.

France, too

JAL is also reportedly in talks with Air France-KLM over a capital tie-up, Japan's top-selling newspaper the Yomiuri, reported this weekend.

The discussions could turn into a battle between Delta and American, said Osuke Itazaki, an analyst at Credit Suisse in Tokyo.

"If a tug-of-war develops between the two American airlines, it is likely to be positive for JAL's shares by raising their potential value," Itazaki said in a note to clients.

"It would also have practical advantages in terms of fund raising and enlarging the scope for efficiency improvements at JAL."

The Nikkei said JAL would cut 4,700 jobs equal to about 10 per cent of its group workforce under the restructuring plan. The airline will also sell subsidiaries and assets to raise capital.

In trading Monday on the New York Stock Exchange, Delta shares rose 50 cents to $8.56 US, a gain of 6.2 per cent, in trading of 13.5 million shares.

American Airlines parent AMR Corp. gained 18 cents to $6.88, a rise of 2.7 per cent.