Japan's incumbent carriers are bracing for their first tussle with new competition in four decades, though analysts doubt that air travellers' expectations of dramatically reduced fares will be met.

The incumbents are also facing a battle for the 40 new slots that will be created at Tokyo/Haneda when the second runway opens in March. Japan's Ministry of Transport plans to allocate a quarter of the new slots created to new entrants, but it has received 120 slot applications in total.

Three new entrants are vying for access to Haneda: Hokkaido International Air, owned by a local chicken farmer, has asked for 12 daily slots; Skymark Airlines, run by a major ticket agency, wants nine slots; and an as yet unnamed carrier based in Okinawa has applied for five.

All Nippon, which dominates Haneda, accounting for 49 per cent of traffic, has requested 35 more slots while Japan Air System has asked for 33. Japan Airlines, which is seeking 26 more slots, is planning to launch a new subsidiary next year on low-density domestic routes with costs 20 per cent lower than its parent and says the new carrier may use some Haneda slots.

Masahiko Kurono, head of the transport ministry's Civil Aviation Bureau, says new slots should be 'distributed in a way that encourages competition and favours fledgling competitors.' The ministry has favoured JAL and JAS over ANA in allocating new slots at Haneda to reduce All Nippon's dominance there.

Hideo Sawada, founder of Skymark, says he will focus on the Tokyo-Osaka trunk market, while Hokkaido has hinted it may examine international sectors including the high volume Hawaii leisure market.

JAL's president Akira Kondo is philosophical about the advent of competition. 'The age of the survival of the fittest is with us now. The dice of deregulation in Japan have been thrown.' ANA almost dismisses the threat of competition out of hand, claiming the startups 'will not be competing so much against us as against the rapid train services.' Both carriers agree however that the startups could help boost traffic volumes with lower fares.

But analysts consider the three incumbent carriers will remain dominant and will not need to indulge in a discount fare war. 'These new airlines won't have the schedule frequency to attract high-yield business traffic on major routes and it will be years before they can really compete,' says one Tokyo-based analyst. In reality, the 40 Haneda slots will do little to ease chronic congestion and shortages will continue to restrain expansion and competition, he adds.

JAL's new low-cost subsidiary will focus on B737-400s, hiring Japanese and non-Japanese crews on a contract basis. It says the airline could have a fleet of up to 20 aircraft within five years, including B767s, and it may also fly wet-lease operations for JAL.


Source: Airline Business