JAL’s full-blown revival to herald new era of competition

March 25, 2017

Tokyo- The Japanese airline industry is set to enter a new era of competition in April, with Japan Airlines to exit from restrictions on launching new operations that were imposed after the public bailout of the former national flag carrier.

Following its bankruptcy filing under the corporate rehabilitation law in January 2010, JAL received 350 billion yen in capital from a government-backed corporate rehabilitation aid body, as well as tax breaks.

Thanks to the public support, the company achieved a turnaround and its shares were relisted on the Tokyo Stock Exchange in September 2012.

But ahead of JAL’s comeback to the stock market, the transport ministry drew up a report that stipulated state supervision of the airline to prevent the competitive environment from being distorted by the return of a company that had received generous public support.

Based on the so-called Aug. 10 paper, JAL has faced restrictions on investment and the launch of new flight routes. In allocations of new takeoff and landing slots at Tokyo International Airport at Haneda, JAL has received fewer slots than rival All Nippon Airways.

In the meantime, ANA has rapidly expanded its international flight network. In fiscal 2015, the 30th year since it started regular international flights in 1986, the ANA Holdings Inc.unit finally overtook JAL in international passenger numbers.

In January this year, transport minister Keiichi Ishii underscored the results of the government’s supervision of JAL. “Through the allocations of new takeoff and landing slots, a sound competitive environment has been ensured,” Ishii said.

The transport ministry has decided to discontinue its current regulatory supervision of JAL at the end of this month. “It was a temporary and extraordinary measure,” a senior ministry official said.

But ANA Holdings is unhappy with the ministry’s move. “We can’t say the competitive environment has been corrected,” the company’s president, Shinya Katanozaka, has said.

In line with the end of state supervision, JAL is set to restart Haneda-New York flights on April 1, for the first time in 39 years. In a new medium-term management plan to be announced as early as late April, JAL plans to highlight a “scenario for constant growth,” according to its president, Yoshiharu Ueki.

The transport ministry is now considering expanding the daily number of round-trip flights at Haneda airport by around 53, in the run-up to the 2020 Tokyo Olympics and Paralympics.

The possible further slots at Haneda are all likely to be for daytime international flights, with half of them expected to be allotted to Japanese airlines, including Skymark Airlines, which has expressed eagerness to launch an international route, according to informed sources.

Kwansei Gakuin University Prof. Munenori Nomura, an expert on infrastructure industries, said that transport authorities shouldn’t focus excessively on competition between the two major players--JAL and ANA.

“The government should accelerate regional revitalization by, for instance, encouraging new entries (in the airline industry) and increasing routes between regional airports (in Japan) and overseas cities,” Nomura said. Jiji Press