DAVID FULLBROOK / SINGAPORE
First Japanese airline to go under since deregulation pins survival hopes on tie-up
Struggling Japanese carrier Air Do has filed for protection from creditors. The move is intended to save it from collapse while it works out a restructuring plan, leading to an extensive tie-up with All Nippon Airways (ANA).
The filing represents the first failure of an airline in the country since deregulation in the late 1990s, which led to a handful of new independent carriers joining incumbents ANA, Japan Airlines (JAL) and Japan Air System (JAS).
It does not mean the end of Air Do, however, as the small carrier has begun formal negotiations with ANA on a wide-ranging operational partnership, which could lead to ANA taking equity in Air Do.
ANA says it is considering harmonising reservations systems and co-operating on aircraft maintenance, spares inventory, ground-handling services and cabin-attendant training.
Under the proposed deal, ANA will codeshare on Air Do's six daily flights between Sapporo and Tokyo. Air Do operates two Boeing 767-300ERs leased from Ansett Worldwide on the single route.
A memorandum of understanding was signed with ANA immediately after Air Do said it was filing for creditor protection. Japanese corporate law requires companies seeking the court's shelter to have a sponsor backing restructuring plans.
Mounting losses forced the no-frills carrier to find a major partner to strengthen its position and win cash grants from the government of Hokkaido, where the airline's parent is based, that will clear some of its debts. The carrier is owned by Hokkaido and several Tokyo-based business concerns, but the Hokkaido government is its biggest creditor.
ANA makes no mention of direct financial aid to Air Do, although it is expected to inject cash and acquire a significant minority stake that could cause the small carrier to lose its "independent newcomer" status.
None of the new Japanese airlines launched in recent years has thrived, largely due to the stranglehold on airport slots of the three larger incumbents. The small players will face an even tougher future after JAL's friendly takeover of JAS, due to be completed by 2004.
Despite flying on arguably the world's most lucrative route, between Sapporo and Tokyo, Air Do could not capture a large enough slice of the market to generate profits. The majors responded quickly to Air Do's cheap fares by dropping their own prices and maintained their dominance of the route thanks in part to their near-monopoly on slots at Tokyo's Haneda domestic airport.
Source: Flight International
