Staff writer

New players are expected to enter the domestic aviation market later this year, bringing greater competition and offering consumers more choices. But the newcomers will have to clear some high hurdles before they can get off the ground.

Three new carriers -- Hokkaido International Airlines Co., Japan Pacific Airlines Co. and Skymark Airlines Co. -- are currently consulting with the Transport Ministry to obtain approval to start regular air services out of Tokyo's Haneda airport.

If any of the three firms successfully launches service this year, it would be the first new airline in 37 years to take to the skies above Japan, a country where three existing airlines effectively dominate the domestic market.

Hideo Sawada, chairman of Skymark Airlines, stressed the importance of bringing competition to the business, saying it would lead to better services for consumers and job opportunities for young people. "This country is tied up with regulations, which have limited opportunities for (newcomers). Our entry will contribute toward changing that," Sawada said. "Also, we want to challenge (the conventional business) with new services that will make users happy."

Hokkaido International Airlines, which plans to operate between Tokyo and Sapporo in summer, aims to revitalize the local economy by linking the prefecture to the capital at a lower fare, said Akira Nakamura, president of the firm, which was founded in November 1996.

"Our priority is to be a community-oriented airline. Local business circles and people have created us to help improve local business by shortening distances to other economic spheres at lower fares," Nakamura said. In accordance with this policy, Hokkaido International Airlines raises capital from major local companies, while accepting individual investors for a minimum of 500,000 yen. About 300 individuals, including housewives, invested money in the new carrier, Nakamura said.

JPA, which was originally planned as a short-distance international charter flight operator, hopes to gain knowhow and experience in domestic service and expand the business to begin international services in the future, said Yasuhisa Azuma, president of JPA. The new airline hopes to fly between Tokyo and Fukuoka beginning in July.

Although the new firms plan to contract existing airlines to take care of matters such as aircraft maintenance and airport counter operations, it is no easy task for strangers to the business to prepare for airline services without knowhow and sufficient human resources.

"This is an uphill battle," Sawada admits. "In the hotel and travel industry, we can do everything by ourselves. But in the airline business, which is similar to the tourism industry in many ways, such as (the) safety and service (aspects), we have no choice but to rely on others."

Skymark Airlines is proceeding with preparations to launch services in cooperation with All Nippon Airways Co., while the two other firms have exchanged memorandums of understanding with Japan Airlines for assistance in such fields as maintenance and flight operations.

While the ministry is contemplating deregulation of the airline business, it will maintain safety standards before it grants approval to the new firms by strictly checking such aspects as their finances, insurance policies, aircraft, crew, maintenance and flight plans, according to a ministry official.

Observers pointed to the difficulties in securing staffers experienced in the aviation business in Japan, which lacks a broad range of businesses related to the industry. In contrast, the United States has aviation businesses across the full spectrum, ranging from airlines to aircraft manufacturing. Accordingly, experienced personnel are accumulated in those sectors, and people with expertise move across those sectors.

"The biggest difference between the U.S. and Japan is the flow of people in the business," an industry source said. "In Japan, only airlines have such knowhow and people with expertise. In other words, there is no alternative but to bring in such people from the three existing airlines."

Skymark Airlines plans to file an application with the ministry for approval as early as this month, aiming to start offering services between Tokyo and Fukuoka in the summer. JPA and Hokkaido International have not specified when they will file for approval yet.

In addition to clearing the safety standard, the latecomers face another hurdle, because the ministry will allocate slots at Haneda airport, from which they plan to operate, to only two new carriers.

"We think it is better to have new airlines compete, although there is no specific reason why we decided to allocate Haneda slots to two firms instead of three," one ministry official said. The airport handles more than 50 percent of Japan's domestic passengers.

In 1995, the route between Haneda and Sapporo occupied the first position in the world in terms of the number of passengers flying between two cities, carrying about 7.6 million people a year.

This was followed by the route between Haneda and Fukuoka, serving about 6.2 million. The third most heavily traveled route was between Hong Kong and Taipei, with about 4.5 million, according to the ministry.

Rights at Haneda airport will be given to the first two new airlines that obtain approval from the ministry, leaving the third with nothing at Haneda and forcing it to operate from other, less profitable airports.