TOKYO — American Airlines escalated the bidding war for Japan Airlines to try to keep it from defecting to rival Delta's alliance, even as the Japanese carrier moved closer to bankruptcy.

American and key airline partners yesterday said they are prepared to inject $1.4 billion cash into Japan's flagship carrier, up from the previous offer of $1.1 billion. In addition, they will guarantee $2 billion in revenue over the next three years if Japan Airlines, JAL, stays in the oneworld family.

"This proposal demonstrates oneworld's extraordinary commitment to JAL," said Tom Horton, American's chief financial officer. "It brings stability and certainty to Japan Airlines at a time when it is most needed."

The announcement came as the Japanese government is finalizing details of a turnaround plan for JAL, which is deeply in debt and suffering heavy losses. The plan will likely include a bankruptcy filing, a cut of about a third of JAL's work force and canceling of almost $4 billion in debt, according to media reports.

Transport minister Seiji Maehara met yesterday with JAL's major creditor banks, and said they intend to cooperate with the plan being hammered out by a state-backed corporate turnaround agency.

He said the government is committed to keeping JAL flying as it restructures.

Meanwhile, JAL said it managed to convince more than two-thirds of its retirees to agree to major cuts in pension benefits, clearing a critical roadblock in qualifying for public aid.

The day's developments led investors to unload JAL shares, fearing that the plan involves removing the issue from the Tokyo Stock Exchange. Prime Minister Yu-kio Hatoyama suggested yesterday that delisting may be inevitable during restructuring, saying "shareholders have a certain responsibility."

JAL shares plunged 81 per-cent today — or 30 yen from yesterday's close — to 7 yen. Morning trading in JAL was paralyzed by a glut of sell orders.

But JAL is still Asia's biggest airline and its access to the region is a prized asset for other airlines. Executives from oneworld alliance members American, British Airways, Qantas Airways, and Cathay Pacific Airways said at a press conference yesterday in Tokyo that their plan would help the Japanese carrier in its recovery.

Rival Delta Air Lines and its SkyTeam partners have offered $1 billion, including $500 million in cash. But the turnaround agency is likely to decline all cash offers, concerned that giving foreign carriers a stake in JAL would complicate the restructuring.

"While JAL and the Japanese government might decide to address capital requirements internally ... our offer of capital would be available if this was deemed an appropriate resource to aid in the restructuring of JAL," Horton said.