JIN-424 -- Opening Japan's Skies: Part One

J@pan Inc magazine presents:
The 'JIN' Japan Inc Newsletter
A weekly opinion piece on social, economic and political trends
in Japan.
Issue No. 424 Wednesday July 25, 2007 TOKYO

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Since the first manned flight on December 17, 1903, when the very
brave—or very insane—Wright Brothers managed to stay aloft in
their prototype plane for a mere 12 seconds in 27mph wind, the
aviation industry has grown into the singularly most important
bridge between people, save for perhaps the Internet, of
course. But today, the pressure on what has traditionally been
a flagship industry for individual nations is under increasing
pressure to liberalize.

But liberalizing one of the most complex industries in the world
is no small feat. National protectionism of flagship carriers is
the standard. For example, in Japan the two major carriers, JAL
and ANA have prominence yet there is an unusually low market
presence of low-cost carriers. Opening up domestic routes in
Japan to foreign carriers, for instance, may have devastating
effects on ANA, or be the catalyst to force ANA to do what it
does best, as has happened to other major European carriers. The
other question must be, of course, is it fair that Japanese
consumers pay such notoriously high prices for domestic flights?

Japan is facing increasing pressure from all corners of the globe
to open its skies, but several clouds must be cleared first: most
importantly, sizing up the best way to retain its hub status, as
a gateway through Asia to the rest of the world, without
compromising its national carriers. Indeed, if such moves are
not deemed to be in the airlines best interest, the government
can be assured of their resistance.

Prime Minister Shinzo Abe has headed up a new committee this year
to address just this issue. The Asian Gateway Initiative’s main
purpose is to look into the liberalization of aviation services,
open skies agreements and the expansion of 24-hour airport
services, and Japan’s international business community will be
hoping for service, schedule, route and pricing improvements.

It appears, at least at this stage, though, that any deregulation
will be limited to regional airports, while the major centres
will remain under government control. According to pirep.org,
‘a forum for thinking pilots with an opinion’, Kansai business
leaders would like deregulation extended to major hubs too.
‘We want [the government] to further promote deregulation because
we have received requests from Thailand and Vietnam for the start
of services to Kansai Airport,’ said Kansai Economic Federation
Chairman Yoshihisa Akiyama, a member of the panel chaired by the
Prime Minister.

A highly regulated environment exists in the business aviation
sector also, so much so that its potential growth is being all
but ignored. According to the American Chamber of Commerce in
Japan (ACCJ), there are only 63 private charter jets in operation
in Japan, compared to the 15,663 registered in the US. The
increase in business aviation since 9/11 has been unfathomable,
and yet, there are still major discrepancies between rules for
foreign and Japanese charter operations within Japan. In other
parts of the world, the nature of business charter aviation is
becoming highly evolved. Silver Jet, for instance, converted
their fleet of 767s to 100-seat planes with private terminals in
both London and New York. Using smaller terminals with good
access to the city, they also offer 30-minute check-ins. If
you’re flying for only 2 hours, the reduction in check-in time
can make a huge difference, and given its pristine global locale,
a service such as this in Japan would no doubt be a boon.

Pressure for Japan to liberalize is bound to increase as ASEAN
nations move towards liberalizing their own skies from 2008.
Japan’s support of ASEAN’s plan appears only to extend as far
as liberalization that benefits Japan’s regional centers. In
other words, slots in the highly prized Narita schedule will
remain under the watchful eye of the government, while smaller
centers will welcome new carriers. There appears little debate
into issues such as airline ownership rules.

This month, the International Transport Policy Research
Institute, which is a part of the Graduate School of Public
Policy at the University of Tokyo, invited aviation experts from
all over the globe to speak at a seminar on slot allocation,
pricing and regulation at congested airports. Among them was
Mott McDonald’s Director of Aviation Strategy, Laurie Price.
Having extensive experience in advising governments on their
aviation policies, including his native UK and the EU, Mr Price
spoke with J@pan Inc about the possible solutions he envisages
for Japan’s industry.

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‘[The University of Tokyo] invited me to speak about slot and
capacity issues, because of the parallels with Europe, and the
chronic shortages of slots, particularly in London, are very
real. We were trying to show what the options might be to try
and resolve the shortage of slots in Japan—what mechanisms there
might be through the use of economic criteria, including
pricing, auctions, bids, things like that, or indeed trading,’ he
explained.

Slot trading has a lot of potential to help solve the efficiency
of slot allocations in Japan. Mr Price explained: ‘Twice a year
there is a conference [hosted by the International Air Transport
Association (IATA)] where all the airlines and airports gather
for the purpose of slot coordination and allocation. The airlines
put forward their detailed flying programmes and schedules. Take
a case, British Airways will take its forward flying programme
for its operations out of Heathrow and say, ‘I need corresponding
slots to do this programme in New York, Narita, Paris’, and so
on. Inevitably, there is more demand for slots than there are
slots available, and so what you’re after is to try to adjust
programmes and the available slots to achieve a viable
programme.’

Of course, ‘slot adjustment’, for want of a better expression, may
not always end up in the airline’s favor. ‘Where they don’t
[work out], inevitably what will happen is, say a domestic
British Airways’ Aberdeen flight maybe sacrificed to operate
a new flight to Abu Dhabi or to Narita. Because in contrast to
putting a 737 into Aberdeen, putting a 747 on the same slot
flying to and from Narita will get you about 100 times the
revenue contribution.’

It is perhaps for this very reason that Japan remains resolute in
its protection of domestic routes. Opening up Haneda, for
instance, to more international flights will inevitably makes
those slots more valuable if an international flight carrying
more passengers were to commandeer it. ‘Therefore…it may
mean that vital short haul domestic connections are lost, and
this has certainly happened out of Heathrow in the past, where
we now only have nine domestic destinations served out of
Heathrow, whereas at one time there were about 20. Amsterdam
Schiphol Airport is now better connected to the UK regions than
our major international hub at Heathrow. So this could be a
danger if you got it wrong, the same loss of domestic connections
to [and from] Tokyo.’

Continued next week.....

By Willhemina Warlin
Writer, J@pan Inc magazine

Want to comment? It is now even easier to voice your opinion
than ever before! Visit www.japaninc.com/jin424 and click on
the 'add a comment' button at the end of the article.
Alternatively you can email it directly to the author at
willhemina.wahlin@japaninc.com

++EVENTS

------------------- Tokyo Sinfonia--------------------

Under director Robert Rÿker
Tokyo Sinfonia, Tokyo's premier chamber orchestra, is to
treat audiences to a series of performances at Oji Hall, Ginza:

14th September - Symphonies for Strings - Beethoven
Grosse Fugue for Strings, Op. 133
Symphony in C Major (from Op.29)

12th December - Symphonies for Strings - Mozart
Adagio and Fugue for Strings, KV 495
Symphony for Strings in D Major (from KV.593)

Place: Oji Hall, Ginza
Price: Y6000 (single) Y10,000 (pair)
Email: tokyosinfonia@gol.com
Tel: (03) 3588 0738

---------------- ICA Event - July 27 ----------------------

Event:Joint ICA / ACCJ Summer Networking IT Party

Details:Complete event details at http://www.icajapan.jp/
(RSVP Required)
Date:Friday, July 27, 2007
Time:6:30pm-9:00pm, Light buffet and Open Bar included
Cost:6,200 yen (members), 7,200 yen (non-members)

Open to all-location is Ristorante Conca d'Oro

http://www.websanko.com/b_info/akgardencity/details.html

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