JIN-425 -- Opening Japan's Skies: Part Two

The 'JIN' Japan Inc Newsletter
A weekly opinion piece on social, economic and political trends
in Japan.
Issue No. 425 Wednesday August 1, 2007 TOKYO

*****OUT NOW J@PAN INC MAGAZINE'S SUMMER ISSUE*****
Featuring our Real Estate Special, Web 2.0 Marketing and more!

Opening Japan's Skies: Part Two
For 'Part One' see http://www.japaninc.com/jin424

The British carrier, BMI, is a good example of just how lucrative
the trading of airport slots can be to the aviation industry.
Mott McDonald's Director of Aviation Strategy, Laurie Price, who
was invited to Tokyo in July by Tokyo University's International
Transport Policy Research Institute in the Graduate School of
Public Policy, explains that in BMI's case, it's key value is in
fact its slot allocation. 'The value of British midlands BMI—the
main value of BMI - is its 11 percent holding at Heathrow, which
is probably worth somewhere around 300 million pounds.'

Slot trading is traditionally a highly secretive, 'off the books'
scheme. 'At the moment, you've really got to dig deep to try to
find out any information at all. The first time it ever became
available was when KLM bought some slots from an operator that
used to go to Guernsey, called Air UK (that became KLM UK and
then just KLM), that showed such trade in their balance sheets.'

The answer, suggests Mr Price, is to bring slot trading out of
the closet. 'We were proposing that there be a formal recognition
that the trading of slots between carriers that has gone on for
many years, almost behind closed doors, as a form of secondary
trading be recognized,' he said. 'Where one airline pays another
airline to purchase slots, as has been the case in London, where
carriers have paid anything up to 12 million pounds a pair for
slots at peak times, the fact of that trade will be published,
and as such, make the whole process transparent.'

Professor Peter Forsyth, Deputy Director of the Tourism Research
Unit at Australia's Monash University suggests that to get slot
trading underway, you do not necessarily need to wait for
deregulation, 'You should think of them as two separate things:
you could have an open market in airport slots, while at the same
time having airline markets still fairly regulated.' He suggests
that this regulation can be both in terms of airline ownership
and conditions under which carriers can fly.

'It might be that you still have restrictions on, let's say, a
Korean airline that's not allowed to fly between, say, Tokyo and
Beijing.' Mr Forsyth explains, adding that for those airlines
allowed to fly, they are able to get slots easily, and that's all
to do with trading arrangements at airports. 'The trouble is that
nowhere in the world has a really open market for slots
developed. In Europe they're trying to move things towards more
flexibility in slots and trading. There's still a question as to
what extent the airlines will trade. If a major airline doesn't
put their slots on the market, but they're not using them very
effectively, then the market will be slow to develop.'

---------- J@pan Inc Magazine Legal Feature ---------------

Are you in the Legal Business?
Then you should be in the Japan Inc Legal Directory.
...And it’s free!

Reach your target market by being in the September 2007
issue J@pan Inc Magazine is distributed to:

* The Japan Times Subscribers
* Asahi International Tribune Subscribers
* ACCJ members
* Oakwood Residence (each room in Kanto area)
* United Airlines (First class passengers)
* Singapore Airlines (In-flight magazine)
* Lufthansa (In-flight magazine)
* All good bookstores throughout Japan

Online at www.japaninc.com
Contact Sachie at sachie.kuroda@japaninc.com
to get your free listing in the J@pan Inc.

Legal feature in September 2007 issue.
Competitive advertising rates available.
-----------------------------------------------------------

For Japan, of course, one of the first issues on the agenda has
to be the disproportionate use of slots between the Kanto and
Kansai airports. Narita is operating at full capacity, and has
some of the highest landing fees in the world. Let's not forget,
at this point, that Narita has been beset with problems ever
since the government built it without much regard for the local
population way back in the late '60s. By the time it was open in
1978, there was no railway line, and, so the story goes,
commuters had to be ferried by buses to the terminal, surrounded
by riot police and barbed wire. Any expansion suggested ever
since has been done amidst much hand wringing and haggling with
local farmers. While it is difficult to substantiate the rumour,
there are reports that a group of farmers have allotted their
land into pieces so small that it would take years for it to be
appropriated by the government. No doubt it is this type of
resistance that saw the new airstrip extension reduced from 2500
metres to 2180.

Kansai, on the other hand, has a surplus of slots. Kobe Airport,
opened in 2006, is facing stiff competition from Osaka's two
major airports, the Kansai International Airport (KIX) and the
deceptively named Osaka International Airport, which services
primarily domestic services. KIX is an increasingly important
airport for Japan, and was ranked 4th by Skytrax among the
world's regional airports. It opened in 1994 as Japan's first
24-hour facility, with links to 15 cities within China alone and
19 cities domestically, accommodating 683 flights a week. Real
potential can also be found in the cargo sector, with the number
of flights departing and landing at KIX reaching 100,000 per
year. It's also the perfect region to begin a regulation and
infrastructure overhaul of the business aviation sector. As of
September 2006, KIX accommodated 51 airlines, with lots of
room to spare. Compare this to the 40 airlines waiting for slots
at Narita, and it becomes obvious that the disparaging gap needs
some attention.

'Obviously, geographically, Japan is very, very well placed to
service an intermediate transfer hub, particularly with traffic
coming from the whole of the western seaboard of continental
North America,' says Mr Price. 'But that also then means we've
got to associate that with a move or otherwise to air service
deregulation, as you've had partially in Australia, that you've
had in the USA and Europe now, but it is only partially happening
in Asia.'

As other airports in the region begin to flourish, particularly
established hubs in Hong Kong and Singapore, Japan needs a
radical re-think of its aviation policies. The government is
acutely aware of the economic implications it faces if it were
to lose out to other regional airports, and lose its hub status.
As those 'thinking pilots' at PIREP suggest, industry observers
have estimated that air travel in the Asia-Pacific region will
overtake North America by 2025. China and South Korea are
already revamping, in order to accommodate all those guests. If
they have freer slots, cheaper landing fees and open skies, well,
pardon the pun, but the sky's the limit.

But Japan is right to be cautious. Open Skies agreements, like
many 'free trade' arrangements, may not be as 'free' as they
seem, depending on a nation's bargaining power. Of course, while
consumers may benefit from a more open arrangement, the airlines
may resist an increase in costs or competition. The real
challenge for the government is to get a critical mix of private
and public enterprise that will keep everybody happy—or at least
make nobody upset enough to cause a serious obstruction.

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/jin425 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

PLUS: AUGUST SPECIAL EVENT
17th August () French Serenade dinner-concert at the
Foreign Correspondents' Club of Japan (FCCJ)
Aperitif, Petit Suite (Debussy)
Entrée, Tzigane (Ravel) featuring Tomoko Joho as violin soloist
Valses Nobles et Sentimentales (Ravel)
Dessert, Pelleas et Mélisande (Fauré)
Dinner & concert from 6.30pm, Y6,900
For Reservations (required), kindly email the Tokyo Sinfonia:
tickets@tokyosinfonia.com or phone us at (03) 3588 073
-----------------------------------------------------------

Japan's First Family Social Network is here! www.piqniq.jp

Are you raising a family in Japan? Do you speak English?
Would you like to meet other English speaking families in
your area? Piqniq is a Social Network Service tailored
specifically for you!
Our concept is "Families helping Families" and we invite
anyone that wants to meet other families, help other families,
or discuss family-related issues pertinent to life in Japan
to come and join the Piqniq today!

For more information: www.piqniq.jp

-----------------------------------------------------------

business