Airlines face open skies test

New pacts to ratchet up competition for domestic carriers, airports

by Mie Sakamoto

Kyodo News

The nation’s aviation policy marked a turning point in October when Tokyo signed an agreement with the United States to fully liberalize their civil aviation markets in parallel with the resumption of full-fledged international operations at Haneda airport.

While the open skies treaty, which will allow low-cost airlines to fly to airports in Japan, is expected to benefit passengers with lower fares and more flights, domestic airlines and airports are expected to face fierce competition for survival as Japan seeks to conclude similar pacts with other markets.

“We hope to reach (open skies) accords with members of the Association of Southeast Asian Nations” and other Asian economies, Land, Infrastructure, Transport and Tourism Minister Sumio Mabuchi said recently.

Japan now has open skies accords with 10 countries and regions, but before the U.S. pact, the Tokyo area’s main gateways — Haneda and Narita — had been excluded mainly because of their limited takeoff and landing slots.

But that has changed. Haneda now has a fourth runway open and a new international terminal and Narita raised its annual number of slots by 20,000 to a maximum of 220,000 last March.

In addition, Narita last month announced it would further increase slots amid growing concern among local governments that Haneda, which is much closer to central Tokyo, will draw in people who would otherwise fly from Narita in Chiba Prefecture.

“The latest open skies treaty has major significance, as upcoming agreements will include the airports in the capital region like this one,” said a transport ministry official.

As Mabuchi noted, Japan hopes to reach similar pacts with other Asian markets, including South Korea, Vietnam, Thailand and Malaysia.

Positive windfalls from the treaty include an increase in tourists and more exchanges. With the expected participation of overseas low-cost carriers, airlines will be able to freely enter the Japanese market or increase flights under the pact, the official said.

But domestic carriers will now face cutthroat competition with low-cost rivals.

In September, Malaysian budget carrier AirAsia X said it will begin Kuala Lumpur-Haneda service on Dec. 9, offering some one-way tickets at ¥5,000.

All Nippon Airways Co. also plans to establish a low-cost carrier by the end of this year.

The limited slots at at Narita and Haneda had served as a “breakwater” protecting domestic carriers, said Hajime Tozaki, professor at Waseda University, adding that a reduction in the U.S. share at Narita would resolve some inequality.

Amid the trend toward globalization, Japan had no choice but to jump on the open skies bandwagon as competition heats up in Asia, Tozaki said.

The transport ministry official said the pact is designed to enhance domestic airlines’ global competitiveness, because they would only get weaker if they continued to be protected by regulations.

“We think it is right to help ANA and Japan Airlines Corp. obtain the strength to expand overseas in fair competition, while promoting other air carriers’ ability to start international services, rather than protecting (the domestic carriers) with tight regulations,” the official said.

While some Japanese airlines would be able to launch low-cost carrier businesses to cope with overseas budget airlines, Tozaki was unsure if they would succeed in the domestic market, where many people take quality in-flight service for granted.

“Japanese air carriers should cater to people with high incomes who want value-added services by demonstrating their solid brand images,” he added.

Regional airports, many already mired in unprofitable operations, will meanwhile struggle to survive as carriers withdraw from money-losing routes.

“Regional airports were able to cater to demand resulting from supply limitations at the airports in the capital region,” Tozaki said.

“But they are going to suffer once that demand eases.”

But increased Haneda traffic may in the end serve to stimulate regional airports, as the Tokyo airport is the largest hub for domestic flights, serving about 50 domestic routes.

“The survival of regional airports will be hinged to how they market themselves,” Tozaki said.