Domestic Airlines Deregulated

Back to Contents of Issue: April 2000

Virtual Take-off

by Kyoko Fujimoto

It's been pointed out elsewhere that just as the supposed paperless office led to more paper being used, the virtual office has led to more flights being booked. Doing business with people you can't see face to face, it seems, just doesn't fly -- so people fly, literally, and airlines in the Internet age thrive.

Japan's domestic airline industry hasn't benefited completely from this phenomenon because, until February, it was regulated by the Ministry of Transport, which had the final say on how much fares could be adjusted. With deregulation, though, the airlines -- the well-positioned, larger ones, at least -- could be set to take off. April to June is a deregulation test period, but already No. 1 carrier JAL, much to the disgust of travel agents, is offering an "Internet Fare" good for about 25 percent off normal rates. No. 2 ANA points out that hurried customers using JAL's Net approach could try to buy discounted online tickets with their i-mode phones before heading over to the ticket counter to pay the premium rate. For its part, ANA is offering extreme discount rates that for certain dates and routes are cheaper than using Shinkansen (supersonic trains).

But the airlines, analysts warn, are probably just behaving themselves for now. While fares for certain popular routes will no doubt go down with increased competition, the price for many domestic routes -- especially ones to underserved or remote areas -- could rise dramatically once the trial ends. Indeed, once the airlines are completely liberated, there's no reason for them not to hike rates as much as possible whenever and wherever competition -- or a lack of it -- permits. How high could fares go? The sky's the limit.

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