Japan Airlines Corp. (JALSY, 9205.TO) planned to announced Tuesday afternoon in Tokyo that it would maintain its alliance with AMR Corp.'s (AMR) American Airlines, according to a person familiar with the matter, dealing a massive blow to rival Delta Air Lines Inc (DAL).

The decision is the culmination of a months-long battle between the two leading airlines in the U.S. over Japan's ailing national carrier, which filed for bankruptcy protection last month with $25 billion in debt.

(This story and related background material will be available on The Wall Street Journal Web site, WSJ.com.)

For months, Japan's transport ministry had been pushing for a tie-up between JAL and Delta, as the latter has a larger trans-Pacific flight network than its rival. The move to stay with American is a surprising about-face for JAL.

The decision to remain with American was largely due to the thinking of its new chairman, Kazuo Inamori, according to a person familiar with the matter. Inamori, the founder of ceramic maker Kyocera Corp. and who has become a famed management guru, started on Feb 1.

He insisted that JAL start the process anew and with a clean slate. Inamori also had conversations with officials in Washington D.C. over concerns that a Delta-JAL alliance would run into trouble with regulators over antitrust concerns, as its trans-Pacific marketshare would be over 50 percent, according to this person.

For Delta, the decision means that it will be without a Japanese partner--a liability as the U.S. and Japan have reached an "open skies" accord that opens new opportunities for airlines to offer services as partners.

Now JAL-American will pursue "anti trust immunity" allowed under the agreement, allowing them to schedule flights as a single entity. Delta's other top U.S. rival, UAL Corp's United Airlines (UAUA) is expected to do the same with Japan's other main airline, All Nippon Airways Co (9202.TO).

Underscoring the importance of the deal to Delta, its top executives have been shuttling to Tokyo on a near-weekly basis. Alongside the integration of Northwest Airlines, which Delta acquired in 2008, JAL has been a matter of top strategic importance to the U.S. carrier.

Delta is the largest U.S. carrier in Japan, with a market share of more than 20% on flights between Tokyo and North America. American has a much smaller market share, despite a longstanding code-sharing alliance with JAL.

None of the three airlines--JAL, Delta or American--had any immediate comment.

When word first spread over the weekend that American was emerging as the favored carrier, Delta said in a statement Sunday that it "continues to be in discussion" with JAL and that it "is confident" a partnership "would provide the greatest opportunity for JAL to increase annual revenues over the long term."

Delta added it's "also confident" a Delta-JAL joint venture would obtain antitrust approval.

Both companies had also offered more than $1 billion in capital and incentives to JAL. But the Japanese government, which has already pumped money into JAL, appeared to rule out any such investments, at least for now.

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