The Lid Over Japan
As with its other markets, Japan is reluctant to open its commercial airline business to unfettered foreign competition. U.S. government negotiators are in Tokyo this week for a new round of talks aimed at increasing the number of U.S. airlines and flights allowed into Japan. The prospects? Rough weather ahead.
The goal is to get Tokyo to lift restrictions and eventually commit to an “open-skies” policy that would free air routes from government regulation. Open competition would benefit travelers on both sides of the Pacific--especially the Japanese, who pay inflated prices for air travel in their controlled market.
For U.S. airlines, Japan is a desirable destination because of the booming volume of transpacific passengers, its strategic location for aircraft refueling and as a gateway to other points in Asia. The United States has open-skies agreements with 26 countries, from Germany to Singapore. But American carriers are hobbled in the Tokyo market by the 1952 U.S.-Japan air service agreement.
Under the agreement, three U.S. carriers-- Northwest, United (which assumed Pan Am’s routes) and Federal Express (successor to Flying Tiger)--gained rights to fly between the United States and Japan. They also were to have unlimited “beyond rights” to pick up additional passengers and cargo in Japan and fly on to a third country. In practice, however, Tokyo has balked at fully granting such rights. In the mid-1980s, the deal was amended to allow American, Delta and Continental airlines a limited number of routes to Japan. In exchange, All Nippon Airways received some U.S. routes.
Tokyo has not indicated any readiness to open its airline market since then, however, even though the United States is willing to phase in the changes over a few years to give Japanese carriers time to prepare for a free market.
U.S. negotiators are seeking new routes, guaranteed landing slots at crowded Tokyo and Osaka airports and beyond rights for U.S. carriers. All of the U.S. overseas carriers want open skies with Japan. But they are split on how to achieve that goal. Northwest is holding out for an all-or-nothing deal because it would benefit the most from the status quo. Other airlines are willing to settle for specified new routes until Japan is ready to liberalize, so they can at least get a little deeper into the market.
Tokyo wants to amend bits of the 1952 agreement. But if Japan does not get more serious about open skies, the Clinton admimistration may have no choice but to bypass Japan and negotiate such agreements with its neighbors. That’s bad business for a Japan seeking to remain Asia’s leader.
