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Government and Economy

How to Interpret Opinions of the Minister of Land, Infrastructure, Transport and Tourism-
On JAL Reconstruction and Repositioning Haneda as an International Hub

Hajime Tozaki
Professor, Organization for Asian Studies Waseda University

This is not a matter of a single corporation

The mass media cover the issue of Japan Airlines (JAL) reconstruction nearly every day. It would be a mistake to regard this as simply an issue of management at one corporation. It is, in fact, a significant issue which involves airline administration and airport administration, and which also affects transportation policy as a whole.

While JAL is a private company, it is also called upon to fill a public transportation role, as it is required to serve regional routes that are not profitable, and this is where JAL differs from a purely private company. Most of these unprofitable routes were created one after another, prompting strong criticism from regional airports, which regard them as a boondoggle.

In the main, regional airports were created based on petitions from the region. As a result, considering the nation as a whole, we must rationally question whether there is truly a need for these facilities. And as half of regional airport construction costs were provided as special accounts (formerly, airport facilities special accounts; currently, corporate capital special accounts/airport facilities accounts), national funds came to be invested toward this end. As a result, regional stakeholders realized that they would incur losses unless they created such accounts in order to receive public funds to cover the ensuing regional burdens. Another source of funds for these special accounts is the usage fees paid by airline companies. With international competition, these high usage fees are a significant burden to airline companies.

Problems presented by keeping regional airports afloat

The New International Terminal Building under construction at Haneda Airport

The current Democratic Party administration is declaring that they will review these special accounts going forward. If they genuinely pursue this course, the problems presented by keeping regional airports operational will grow. The question of whether or not regional airports are truly necessary has been debated for some time. Going forward, however, we can expect increased debate including the issue of airport closings. Such debate would in turn require thorough debate about whether bullet trains, highways, and other modes of transportation would suffice in place of the closed airports. At the same time, this would reveal that in the maintenance of transportation networks up to now, recognition was lacking regarding the need to design an efficient network across different modes of transportation, and reform on this point must be pursued.

The Democratic Party has introduced bills for fundamental legislation of comprehensive transportation to the Diet for some time, and they are again taking a proactive stance toward actually instituting the bill into law. They must now pay close attention to legislative arguments and adjust their course if necessary.

Toward increased international competitiveness

So what will become of JAL going forward? If the current spate of restructuring continues unabated, international competitiveness will increase by leaps and bounds, and JAL may once again enjoy prosperity. But there are high hurdles blocking the way to realizing such a recovery, a point which is already widely argued. Regarding pension fund reductions, which has become a crucial point, the Democratic Party is trying to create new legislation to enable such cuts, but there are questions of whether or not such measures infringe on property rights, and in any event, the very creation of such legislation is roundly criticized as dirty pool.

Haneda Airport striving to become an international hub

There are also the notorious JAL union problems to consider. These union problems were addresses in the novel The Sun that Never Sets (Shizumanu Taiyo), which was later made into a movie, but unlike the simplified version presented in the movie, the actual union situation is extremely complicated. Resolving these problems while avoiding company liquidation procedures would require considerable strategic ability.

In a related matter, the statement by Transport Minister maehara on repositioning Haneda Airport as an international hub caused considerable controversy, and it will significantly affect the aforementioned issue of keeping regional airports operational.

In order to make Haneda Airport into a genuine international hub, the current domestic flights would have to be streamlined and international flights would have to be increased. Next year's offshore expansion will bring an increase of 1.4 times the current number, but based on the current conditions, even attempts to increase international flights will not be enough to convert the airport into an international hub. And there will certainly be an attendant transfer of domestic flights from Haneda Airport to Narita Airport as well. However, from the perspective of stakeholders at regional airports, maintaining flights to and from Haneda Airport as in the past-or increasing them, if possible-would be preferable given its proximity to business centers. What is more, airline companies are opting for smaller aircraft in order to increase operational efficiency, and focusing on increasing frequency to improve competitiveness going forward. Even though there have been some severe impacts on demand for domestic flights, particularly at regional airports, it is unlikely that there will be very sudden and dramatic reductions.

Toward a truly competitive relationship between Narita and Haneda

Further, regarding international flights, the question of how to strike a balance between Haneda and Narita is a difficult one, particularly in terms of international flights. In discussions up to now, a policy has been adopted apportioning short distance international flights to Haneda and long distance international flights to Narita, and current regulation is based on this arrangement. But if Haneda indeed becomes a genuine international hub, this arrangement of general rules would be wrecked as the territorial boundaries are crossed, and the relationship between the two airports could become truly competitive. Of course even if both airports are internationalized, it is not as if one of them will emerge as the victor, handling all of the demand, from those overseas wanting to come to the metropolitan area, as well as the demand from domestic airlines. Even so, going forward stakeholders must urgently conduct thorough examinations to determine what kinds of mutual adjustments are prudent. And the implications for other international airports, such as Kansai International Airport, deserve careful attention as well.

Hajime Tozaki
Professor, Organization for Asian Studies, Waseda University

Professional Summary
Professor Tozaki was born in Osaka in 1963 and joined Japan Airlines after graduating with an undergraduate degree in Economics from Kyoto University. He held successive posts in areas including airline operations, travel sales, and reservations, and entered the Japan Center for Economic Research. Professor Tozaki subsequently retired from the company in order to devote himself to academic work. Professor Tozaki holds a PhD in Economics and worked at Teikyo University and Meiji University before beginning at his current post. His primary works include Airline Deregulation (Kuko no Kiseidanwa).