The Journal The Authority on Global Business in Japan

Travel | Airlines

November 2013
OPENING THE SKIES
Reduced costs, improved facilities, better connectivity needed at Tokyo and Narita airports
By Julian Ryall

There are hurdles that still need to be overcome to make Narita International Airport and Tokyo International Airport (Haneda) world-class facilities for operators, airlines, and travelers alike, but US carriers are hopeful that the International Olympic Committee’s decision to stage the 2020 Olympic and Paralympic Games in Tokyo will serve as a catalyst to the improvements they have been advocating for years.

“Four or five years ago, [the] open skies [policy, liberalizing international commercial aviation to create a free-market environment] with Japan was the challenge that we faced. However, this agreement has been in place since 2010 and it has paved the way for improved relations, ease of doing business, access, and so on,” said Matt Miller, managing director for Japan and Pacific sales at United Airlines.

“Japanese airports are very clean, safe, and well-run,” Miller pointed out, adding that Japan’s “fantastic geographical position” for US airlines operating in Asia should give Japan’s airports an edge over rival hubs in the region, such as Incheon International Airport [South Korea], Hong Kong International Airport, Singapore Changi International Airport, and Shanghai Pudong International Airport.

But a litany of problems threaten Japan’s geographical advantage.

“We view Narita as a strategically important hub in the Asia–Pacific region and have spent a lot of time, money, energy, and resources over the past 35 years in building our position there,” said Jeffrey Bernier, managing director for Asia–Pacific for Delta Air Lines, Inc., a vice president of the ACCJ, as well as a former chairman of the Board of Airline Representatives in Japan.

“Last year, we negotiated reduced landing fees at Narita. However, these were marginal decreases, and were not enough. At the same time we saw an increase in facility fees,” added Bernier, whose airline operates over 200 flights a week out of Japan.

In addition, the airports of Narita and Haneda are both among the top five most expensive airports in the world from which to operate. “Narita has been in profit every year since it opened, and that is in part because they might discount in one area, but they then increase prices elsewhere, whether that be for parking, fuel, or landing fees,” he said.

Bernier believes there has been a reluctance, on the part of Japan’s airport operators and the Ministry of Land, Infrastructure, Transport and Tourism, to negotiate costs. To some extent, this is because the profits from Narita and Haneda are ploughed into subsidizing regional airports.

“The government has to make a decision to concentrate its resources if it wants to make Narita and Haneda powerful gateways into [the] Asia–Pacific [region],” he added.

The economic benefits are clear and potentially enormous, according to Bernier, and the Japanese government has already pinpointed tourism as a pillar for future growth.

If the government is serious about making the most of the rapidly expanding travel sector, the authorities here need to make their airports competitive, he believes.

“It’s not just about lowering costs,” he explained. “We need to ensure that the facilities and infrastructure are in place to meet demand, such as making sure immigration lines are reasonable, to make it a quick and pleasant experience as people often remember their last experience of a country.

“Tokyo 2020 will be an opportunity for Narita and the Tokyo Metropolitan Government to have a lasting impact on visitors and their desire to come back to Japan,” he added.

Directly related to this is another key improvement that Bernier believes needs to be made: connectivity, without which the economic impact is limited. There is a desperate need to improve access, particularly in the form of a high-speed rail service from Narita to central Tokyo.

“The [Keisei] Skyliner to Ueno has been an improvement, but a lot of people don’t want to go to Ueno, and it’s not the most straightforward transfer there,” he pointed out. “Japan has great railway technology and the ACCJ Transportation and Logistics Committee has been pushing for a high-speed service to link Narita to downtown Tokyo for some time, simply to make Narita [more] convenient.”

Erwan Perhirin, vice-chair of the Transportation and Logistics Committee and vice president of Asia–Pacific operations for American Airlines, agrees that there is a need for a “seamless and rapid transportation system” linking Narita to central Tokyo.

Similarly, Perhirin believes, a direct link between the two airports is needed.

“There has been talk about financing and an investment structure, but no timeline for this connection has been locked in yet,” he said. “It’s important that we move on to this stage and set firm objectives and milestones as the Olympics will be coming to Tokyo in 2020 and there’s not a lot of time.”

Perhirin’s concerns about the industry’s access to airports are not solely a result of Japan’s positions, however, with American Airlines disappointed in the attitude of its own government toward discussions over the slots that are available to US carriers at Haneda.

The problem revolves around the 20 new daytime round-trip slots available to foreign carriers at the airport. American Airlines accepts that Japan’s aviation authorities need to make a similar number of slots available to its domestic airlines and US carriers alike, but United and Delta, carriers with beyond rights to third nations, want to protect their investments at Narita.

One airline is even insisting on being awarded all slots needed to move its entire operation to Haneda, although the Japanese government is not offering its own carriers that option because Haneda is simply too constrained.

“What matters today is that the government of Japan has offered the same number of Haneda frequencies to its own carriers as it is offering to the US carriers,” said Perhirin. “Aside from being standard practice, it provides for parity and is fair.

“It’s also the best and only practical path forward to opening up Haneda and, ultimately, achieving full open skies to the benefit of all US carriers.”

The failure to agree has led to an impasse, said Perhirin. “US carriers have been offered five or six new day-time slots, but the incumbent carriers are seeking all or nothing.”

The US side has “turned down multiple offers from their Japanese counterparts to meet and discuss the situation,” he said.

“It is the US traveling public and businesses in Japan who are paying the price for the lack of progress to meaningfully opening Haneda.

“From next year, travelers going to Europe will be able to fly from Haneda during the day, but the US has no effective aviation agreement with Japan to compete on that level.”

American Airlines, which has operated flights to Japan since 1987 and now has 35 weekly flights into the country, believes Haneda is the preferred entry and departure point for many travelers, due to its proximity, and easier access, to central Tokyo.

However, as a result of the US government’s recent decision not to authorize daytime frequencies at Haneda, American Airlines will terminate in December its Haneda–New York route, the only non-stop service between Haneda and the US east coast.

Bernier emphasized, however, that partially opening up Haneda is not ensuring the “fair and level playing field” that the chamber and the US government are advocating.

“The current proposal gives benefit to Japanese carriers and their partners, since Haneda is a hub for Japanese carriers,” he said.

“The US and Japan don’t have true open skies yet because, if they did, there would be no restrictions on access.

“Opening Haneda needs to be a fair and level playing field,” Bernier underlined.

“Currently, Japanese carriers have access to everything in the US, while US carriers are limited in Japan.”

United’s Matt Miller would like to see progress in an improved user experience at Japan’s gateways.

“I don’t want to make light of issues such as costs, access, and slots. But, in terms of things that can be done in time for the Olympics, I would pick the user experience at Narita and, to a lesser extent, at Haneda,” Miller said.

“This includes signs in different languages, effective air conditioning, more restaurants and retail outlets, and banking facilities for international customers,” he said.

“It’s things like having train or bus tickets, or timetables, printed in different languages—so visitors arriving in Japan for the first time can find their way to where they need to be.”

“These are simple things, but they are really important if Japan is to have airports that are competitive in the region,” Miller said.

“And if Tokyo winning the right to host the Olympics acts as the catalyst to getting the authorities to improve the things that US carriers have been asking for, then that would be fantastic,” he added.

Matt

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Matt Miller is United Airlines’ managing director for Japan and Pacific sales.

DividerJeffrey

DividerJeffrey Bernier is managing director for Asia-Pacific for Delta Air Lines, Inc.

DividerErwin

DividerErwan Perhirin is vice president of Asia-Pacific operations for American Airlines.

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