The latest edition of Shukan Gendai weekly ran a rather big article under the headline 'JAL-ANA grand merger to change skies in Japan.'

Penned by Takashi Arimori, a journalist specializing in business news, it cites quotes by unnamed sources from ANA, JAL and the transport ministry and offers scenarios for a merger of Japan's two biggest airlines.

(1) JAL falls into red in fiscal 2008, which is through March 31 this year and its midterm management plan fails as a result. ANA would come to 'rescue' JAL. JAL would be split into the international service, which would be merged with ANA. JAL's cargo division would be sold to other companies such as trading houses. JAL would remain as a domestic service-only carrier.

(2) JAL falls into red or both JAL and ANA fall into red. JAL and ANA would spin off their respective international services and merge into one, which would likely be run under the initiative of JAL since JAL is better positioned to run international services, given the history. The new entity would be called JANA.

The writer cites as a background consolidations taking place in Europe led by Lufthansa, Air France and British Airways, and in the U.S. as seen in the Delta-Northwest merger.

A transport ministry official was quoted as saying a JAL-ANA merger would be problematic for domestic services due to antitrust concerns (as it would completely eliminate competition) but two Japanese airlines may not be necessary for international services.

Watch out for earnings news for JAL and ANA, it says.