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Exclusive: JAL may take legal action against government over landing slots

Yoshiharu Ueki, president of Japan Airlines, poses for photographs with a model of JAL's Airbus A350-900 after an interview with Reuters at its headquarters in Tokyo October 24, 2013. REUTERS/Yuya Shino

By Tim Kelly, William Mallard and Kentaro Sugiyama

TOKYO (Reuters) - Japan Airlines <9201.T> reserves the right to sue the Japanese government for favoring rival ANA Holdings <9202.T> by allocating it more landing slots, JAL's president told Reuters on Thursday, raising the prospect of an unprecedented battle that could batter the nation's airline industry.

Asking a court to force the government to review its recent allocation would be a rare step for a Japanese company, especially one that once enjoyed cozy ties to politicians and regulators but which has fallen out of favor of Prime Minister Shinzo Abe's one-year-old administration.

"It's one of the steps we might take in the future," said Yoshiharu Ueki said, when asked if legal action was one possibility.

Ueki said his company had asked the government to give a satisfactory explanation for the landing-rights handout, which saw ANA receive more than twice as many of the prized international slots at Haneda airport than JAL.

The government, which had previously always divided slots equally between the two airlines, is expected to respond to JAL as soon as Friday, but Ueki said JAL was extremely dissatisfied with the process so far.

"There are times when you will take actions because you are trying to achieve a particular result, and sometimes you will take actions even knowing that you might not be able to get a particular result," Ueki said.

"Sometimes things have to be said, sometimes things have to be done," he told Reuters at JAL's Tokyo headquarters.

In what became a politically charged battle over the landing rights at the Tokyo hub, Japan's aviation regulators on October 2 awarded JAL five new Haneda slots compared with 11 for ANA.

Two days later, JAL filed its first ever formal request for the government to clarify its rationale for the allocation of the slots, which are worth around $20 million a year in operating profit.

Aviation officials argued that they needed to level the playing field for the airlines after a $3.5 billion state-led bailout waived most of JAL's debt and gave it a competitive advantage over ANA.

ANA lobbied hard for a bigger share of the landing rights, winning the sympathy of Abe's ruling Liberal Democratic Party, which was in opposition when JAL was rescued.

Ueki said the government's decision was opaque and irrational, and left key points unexplained. The resulting uncertainty is preventing JAL from planning its flight schedule for next summer and hindering its mid- to long-term business plan, he added.

In another historic move, JAL ordered 31 Airbus (EAD.PA) A350 jets, declining for the first time to buy from Boeing Co (BA). JAL and ANA have traditionally bought from the U.S. manufacturer in what was seen as essentially an extension of the close U.S.-Japan security alliance.

JAL went with the European maker, Ueki said, in part because it was worried about the risk of being a launch customer for new aircraft, a commitment it would have had to make had it opted to pick the Boeing 777X.

JAL's fleet planning, he said, would turn next to replacing its older Boeing 737 jets. The carrier, which owns 30 of the single-aisle aircraft, will consider proposals from both Boeing and Airbus, Ueki said.

(Editing by Edmund Klamann and Miral Fahmy)