Kansai Airport: A Beautiful Loser

Back to Contents of Issue: September 2003

Kansai international airport is stunning -- but sinking into debt and desolation. Care for a date?

by Dominic Al-Badri

AESTHETICALLY, THE MAIN TERMINAL building of Kansai International Airport (KIX) is one of the most appealing structures of its kind -- not just in Japan, but anywhere in the world. Designed by Italian architect Renzo Piano, the four-story structure is a 1.7 kilometer-long aluminum and glass frame topped off with a roof which arcs in the shape of an undulating wing. Over the past few years, using the airport has become an increasing pleasure -- if you enjoy the misfortune of others.

Fewer and fewer airlines are landing at or taking off from KIX, due to a steep decline in passenger demand. Peak travel times aside, the place often feels virtually deserted. Indeed, when catching a recent red-eye to Bangkok, I felt like the only traveler in the whole airport. Designed to offer a liberating sense of space and freedom, the terminal's strength becomes its weakness when deprived of its lifeblood -- the myriad passengers who should be scurrying to and fro, forming the background hubbub and endless shuffle of any truly international airport.

Since opening for business
in September 1994, Kansai
International Airport Co. has lurched
from crisis to crisis

KIX has been newsworthy ever since its conception as an offshore airport in Osaka Bay in August 1974. As civil engineering feats go, the airport is prize-winningly impressive: located on a 1,300-acre, man-made island linked to the main island of Honshu by a 3.5-kilometer railway suspended over the water. Whether it really is "one of the three man-made objects which can be seen from space," as some locals like to brag, is a matter for astronauts. For the layman, arriving and departing at the airport is a treat -- similar, though for different reasons, to the thrill associated with coming in low over Kowloon when landing at the old Kai Tak Airport in Hong Kong.

But since opening for business in September 1994, the airport's operator, Kansai International Airport Co. (KIAC), has lurched from crisis to crisis. KIX opened its runways just as the Japanese bubble hangover started to kick in. Projected operating costs and profits had been based on what turned out to be over-optimistic forecasts calculated in much healthier economic times. By 1996, foreign airlines, already grumbling about the highest airport landing fees in the world, began scaling back their operations. Before the end of the decade, numerous big-name carriers had ceased flying into KIX entirely. In the mid 90s, there were three daily non-stop flights to London aboard three different airlines. Now there is just one. There are still no flights to New York. As one veteran foreign travel agent based in Osaka put it: "The idea of turning KIX into a hub for Asian destinations will remain unfulfilled. Period."

Even with such ominous clouds on the horizon, stage-two construction plans (which call for the building of an additional 4,000-meter runway on a new artificial island by 2007, at a projected cost of JPY170 billion) were initiated in 1999.

The following year, it was announced that the reclaimed airport island was sinking into the murky depths faster than expected. As the debts from lower-than-expected revenues started to deepen as well, vast amounts of money suddenly had to be spent on keeping the existing structure from being literally submerged. By the end of the year it was estimated that some JPY27 billion had been spent on shoring up the passenger terminal.

Figures for 2001 revealed that KIX was again in debt, as it has been during each year of its operations -- but this time to the tune of JPY15 billion. Overall, the airport has interest-bearing debts of a staggering JPY1 trillion. These are supposed to be paid off by 2027, though some economists project that it will be nearer to the year 2035, a time so far in the future it is almost impossible to imagine what demands will then be made on the nation's transport infrastructure.

KIAC officials somehow continue to put a brave face on things. Their grin-and-bear-it attitude persists, even though the expected number of take-offs and landings at the airport in 2007 has been revised to 136,000 by the Land, Infrastructure and Transport Ministry -- well below the KIAC-projected 160,000 necessary to justify the construction of the second runway. The government doesn't expect this figure to be reached until sometime around 2012. And the numbers were reached prior to any accounting of the long-term effects of Middle Eastern turbulence and rogue Asian viruses.

Affected by both the recent invasion of Iraq and the SARS double whammy -- plus the lingering post 9-11 fear of flying -- Japan Airlines (JAL) has reduced flights to numerous Asian destinations amid declining demand. A Taiwanese doctor who later contracted SARS was found to have visited Kansai in May, just before falling ill. This was the closest Japan got to SARS, but the media hysteria was enough to put most Kansai residents off traveling abroad. So desperate had things become for certain Asian airlines that it was possible to fly, during the peak summer holiday season, from KIX to Australia for less than JPY60,000 roundtrip. The damage caused to KIX's finances has been heavy.

The old Osaka International Airport in the city of Itami, just outside Osaka's municipal boundaries, handles only domestic flights today. It was supposed to have been shuttered for good once KIX became operational. This hasn't happened, and though there is still talk of eventually transferring a higher proportion of domestic flights to KIX, Itami remains far more convenient than KIX for the majority of Kansai residents. The airlines know this; so do the business travelers shuttling to and from Tokyo.

"I actually find the Shinkansen more convenient, as I can read or work while traveling," says Shimizu Naoko, an editor at a gourmet food magazine in Osaka and a frequent visitor to Tokyo. "But if I do fly, then I much prefer to use Itami. It's quicker -- and a lot cheaper -- to get there from where I work."

And with a new airport pegged for Kobe, KIX's problems only seem worse. "Kansai's new international airport should not have been built where KIX is now," says a local travel agent. "It should have been built in the same location as the new Kobe airport [planned in 2005] and called Kobe/Osaka Airport. Then, none of this fiasco need have occurred."

As with every large-scale construction project in Japan, there have been all sorts of alleged financial irregularities at KIX. Last year rumors swirled that there had been substantial bid-rigging by developers of the second runway. This was followed last December by serious allegations that an aide of ex-Defense Agency chief Kyuma Fumio had raked in some JPY50 million in highly suspicious profits from work related to an airport construction project between 1999 and 2001.

Things have really hit rock
bottom when an airport needs to
be marketed as a lovers' haunt

With the seemingly endless litany of woes piling up, the last thing officials needed to hear was that All Nippon Airways Co. (ANA) intends to return more than 2,000 square meters' worth of rented office space to KIAC this October. Representing an annual revenue loss of some JPY400 million, the move came as part of ANA's own cost-cutting efforts and pushed the airport into further desperation.

At the end of June was the announcement that the new president of KIAC would be Atsushi Murayama, previously a vice-president of Matsushita Electric Industrial and the first person from the private sector to be put in charge of airport management. Previously, KIAC's top managers have all been ex-transport ministry officials, which did little to assuage the public's fears regarding bureaucrats and government cash. Murayama has the unenviable job of dealing with an enormous mountain of debt -- so large that radical measures are just about the only options. He has promised to restructure the company, but the jury is still out over whether he has the management clout to do so. Murayama says he is keen "to make people say, 'Let's visit Kansai Airport' to shop or go on dates." This has met with some surprise from locals. "It's not as if there's anywhere to go to eat there!" says Yuri Yamazawa, a 34-year-old Osaka resident. "Sure, there are restaurants, but nothing special. Maybe if there were branches of famous restaurants people would go to eat, but even then, only local people from rural Wakayama. KIX is a long way from anywhere."

"There are international airports that prosper for the first time with only four or five runways," Murayama adds, possibly in an attempt to justify the ongoing construction of the airport's widely derided second runway. But if Murayama is talking of further expansion plans, he should be committed to an asylum. Perhaps they should just fill in the whole of Osaka Bay and be done with it.

And yet, even with all of the strife and turmoil surrounding it, somehow Kansai's airport rises above it all, a rare example of a massive Japanese construction project that, artistically at least, has been a success, basking in worldwide acclaim. Badly located, unloved by foreign airlines and hopelessly mired in the debt-ridden swamp of Osaka Bay, KIX nevertheless remains one of the world's most attractive white elephants ever built. @

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