The government intervention into the affairs of Japan Airlines Corp. will “leave a stain on Japanese history” and risk crippling the nation’s aviation industry, according to former economic and fiscal policy minister Heizo Takenaka.
In a recent interview, the key architect of Prime Minister Junichiro Koizumi’s economic and postal reforms suggested Japan should concentrate on creating a single powerful “megacarrier” with rival All Nippon Airways Co. to survive intensifying global competition.
“The only way to justify the government intervention in JAL would be if the opportunity is used to beef up the industry as a whole,” said Takenaka, now a professor at Keio University in Tokyo.
The comments came after Japan’s biggest airline and its two principal subsidiaries filed for bankruptcy protection last week with combined liabilities totaling more than ¥2 trillion, setting off a government-led rehabilitation process backed by public funds.
Takenaka warned the Democratic Party of Japan will suffer “a massive failure” if it wipes out the losses from JAL’s balance sheet without drastic restructuring, which could hamper market competition through price-dumping by JAL.
“JAL should restructure 90 percent of its international routes and survive as a domestic low-cost carrier, while ANA should manage the international routes,” said Takenaka, who was a Cabinet member when the Liberal Democratic Party was in power.
“That would, in fact, be an industrial policy to create a megacarrier in Japan.”
Under the current rehabilitation plan crafted by the government-backed turnaround body, JAL is expected to halve the number of its subsidiaries, cut 30 percent of its group workforce, and scrap 31 unprofitable domestic and international routes.
Experts have often called for rethinking Japan’s current aviation market setup, where two major carriers dominate. They say only one of the two will be able to survive as airlines across the globe target the expanding Asian market.
Even transport minister Seiji Maehara recently said, “We need to carefully assess the need as to whether two carriers can exist as megacarriers.”
Takenaka added the “too big to fail” logic, which was applied in the U.S. to bail out auto giant General Motors Corp., would not work for JAL because GM had more than 250,000 employees while JAL alone only has about 23,000 employees.
“Can we really use taxpayer money for this?” he asked. “Before we even talk about rescuing JAL, government intervention in itself is wrong.”
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