Tuesday, December 8, 2009

Why Open-Skies Should be Good for Travelers

Japanese and U.S. negotiators are beavering-away this week in Washington, D.C., trying to nail down the final details of an open-skies agreement between the United States and Japan. Travelers should hope they succeed. An open-skies agreement would liberalize the rules governing aviation between Japan and the U.S., potentially benefiting passengers.

New rules would allow greater access to trans-Pacific routes and give U.S. and Japanese airlines access to more airports, offering travelers more choices of airlines, flights, destinations - and, in theory, lower fares.

Under rules written shortly after World War II, Japan's erstwhile national flag carrier, Japan Airlines, and its major rival, All Nippon Airways, have been granted access to selected U.S. airports. Delta Air Lines (by buying Northwest) and United Airlines (by buying old Pan American Airways routes) control lucrative landing slots at Tokyo's Narita International Airport. They are the only two U.S.-based passenger airlines legally permitted to operate there in a big way. Open-skies would allow more airlines to become major players and increase competition.

A far-reaching pact could also clear the way for antitrust immunity for global airlines that want to hook-up and forge code-share arrangements, fly customers on each other's planes, use each other's airport lounges and send people onward on each other's routes. This would, for example, permit an American business traveler to fly to Tokyo Narita airport on-board American Airlines, then onward into the hinterlands of China on AA partner airline JAL.

This can all get a little technical and wonky, to be sure. But if an open-skies pact is signed - media reports predict a deal as early as this week - a more-seamless travel experience on both long-haul routes over the Pacific and short-haul flights within Asia and the U.S. could result. Any open-skies deal will have to be struck by government officials, as governments - not airlines or airports - write the laws governing international aviation.

While the deal-makers haggle in Washington, the airlines, too, are busy trying to tweak the system. With most nation-states casting a cold eye on trans-border airline mergers, for reasons of national prestige and national security, bilateral competition between airlines is evolving to become a competition between the world's three major airline alliances.

JAL, for example, is a member of the oneworld alliance, which also includes American Airlines and British Airways. Oneworld greatly values JAL, as the Japanese carrier has superb connections in fast-growing Asian markets. Rival airline alliance SkyTeam has offered a billion-dollar (U.S.) aid package to JAL to lure the airline to SkyTeam, led by Delta and Air France/KLM. Star Alliance, the largest of the three global airline alliances, counts Japan's ANA as a member. Fellow Star member United is seeking anti-trust immunity from U.S. and Japanese authorities so it can work more closely with ANA.

So, the wheeling and dealing is intensifing in both the private and the public sectors, all at once.

JAL is key to how all this plays out. Once government-owned, JAL is now a private company. It is struggling due to the downturn in the global economy and staggering under enormous debt and pension obligations. Media reports in Japan say the Japanese government is considering giving a financial aid package to JAL, to keep the carrier flying, and that the package approaches $8 billion (U.S.). Like open-skies, this deal isn't done yet. Should Tokyo come up with an aid package, it will be the fourth time since 2001 that the Japanese government has funneled public funds to JAL.

No comments:

Post a Comment