Building a more competitive Japan - Aviation’s important role

Building a more competitive Japan - Aviation’s important role

Tokyo - The International Air Transport Association (IATA) called on the Japanese government to establish aviation policies that will strengthen the sector and contribute to a more competitive Japan.

“A national aviation policy focused on competitiveness could play a big role in recovering lost economic ground,” said Giovanni Bisignani, IATA’s Director General and CEO in an address to the Foreign Correspondents’ Club of Japan. He urged Japan to develop a more effective airport policy in Tokyo, a level playing field with more open markets for airlines to compete, and an approach to climate change commitments that includes sustainable biofuels.

“China’s growth is creating business opportunities and changing the competitive topography of the world,” said Bisignani. The 617 weekly frequencies between Japan and China show the depth of the Japan-China relationship. China is Japan’s biggest trading partner and its most important international destination. “The competitive challenges are enormous. Japanese labor costs are ten times those of China. Measured by purchasing power parity, the yen is 25% overvalued while the yuan is 70%undervalued. High productivity, high value-added international industries dependant on a competitive and healthy air transport sector has been the answer. Economic success means that Japan must squeeze every iota of competitiveness and innovation possible out of its economy—including aviation,” said Bisignani.

Bisignani made specific recommendations in three areas of aviation policy:

Airports: “Tokyo’s two main airports—Haneda and Narita—competing and adding capacity is a welcome change that will help Japan’s competitiveness. Already it has stimulated low-cost competition and boosted visitor arrival to a record-breaking 8.5 million last year. But we have not yet seen the boost to cost-competitiveness that we would expect. Japan’s government is destroying the international competitiveness of Haneda and Narita by milking them like cash cows,” said Bisignani. He noted that Tokyo’s airports remain 75% more expensive than Seoul (Incheon) and more than double the cost of Singapore (Changi).


IATA called for three actions on airport policy:

Common charges for international operations at Haneda. “International flights at Haneda are charged 50-75% more than domestic operations. The cross-subsidization that follows completely ignores international principles set by the International Civil Aviation Organization (ICAO). Charges for domestic and international operations should be cost related and equal,” said Bisignani.
Abandon the proposed Haneda security charge (JPY 170/passenger and JPY 300/tonne of cargo). “To compete internationally, Haneda must reduce costs, not increase them. If it needs more income, the focus should be on commercial revenues. There is a ready-made opportunity for an exponential increase if the airport’s shops and restaurants were open to serve passengers checking-in for early morning international flights,” said Bisignani who also encouraged the airport to find effective public transport arrangements to support its international operating hours.
Reduced charges at Narita. “The 11% charges reduction in 2005 was a landmark event. But cost competitiveness is a constant challenge.  To compete with Haneda, airlines will need to compensate their Narita passengers for their time and higher ground transport costs. In the past, Narita has provided temporary discounts. We are working with the Narita team to find a balanced and permanent solution,” said Bisignani. Narita’s mid-year profit for 2010 was $116 million, nearly double the $71 million that it made in 2009.

Open Markets and a Level Playing Field: Bisignani encouraged Japan to continue to open its market with Open Skies agreements. “Expanding capacity is a golden opportunity to further open markets,” said Bisignani noting recent Open Skies agreements with the United States, Korea, Singapore and Malaysia. He also encouraged the progressive liberalization of Haneda’s international operating hours to promote its efficiency as a hub and the continued restructuring of Japan Airlines (JAL) to meet the targets of December’s restructuring agreement.

Climate Change Commitment and Sustainable Biofuels: The aviation industry is united in climate change commitments to improve fuel efficiency by 1.5% annually to 2020, cap net emissions from 2020 with carbon-neutral growth and to cut net emissions in half by 2050 (compared to 2005 levels). “Sustainable biofuels, tested by airlines including JAL, will play a key role. But ‘Big Oil’ is more interested to continue to cash $13.7 billion in aviation fuel refinery margins than to invest in sustainable biofuels. Governments must provide a fiscal and legal framework that supports quick commercialization. This is particularly important for Japan where an algae-based biofuels industry could help Japan to meet its climate change commitments and improve its energy security,” said Bisignani. He also congratulated Japan on its early opposition to Europe’s intention to unilaterally include aviation in its emissions trading scheme from 2012. “We need a global framework for economic measures as agreed at ICAO. As we approach the 2012 start date, I hope that Japan will become much more vocal in its opposition.

Traffic Forecast highlights for Japan are:

The number of Japanese domestic travelers is expected to grow from 88.4 million travelers in 2009 to 102.2 million in 2014.  This 2.9% average annual growth is well below the global average of 5.7%. At the end of the forecast period, Japan will continue to be the world’s third largest domestic market, after the United States and China which will have 670.8 million and 379.0 million domestic passengers respectively in 2014.

Japanese international travel is expected to expand from 53.5 million passengers (2009) to 71.6 million (2014). This 6.0% average annual growth exceeds the global average of 5.9%. By 2014, Japan will fall from being the seventh largest market for international travelers to ninth place. The United Arab Emirates and China are expected to overtake Japan to occupy seventh and eighth positions with 82.3 million and 82.1 million passengers respectively.

Japanese international air cargo is expected to grow from 2.7 million tonnes (2009) to 4.4 million tonnes (2014). This 10.2% average annual growth exceeds the world average of 8.2%. In 2014, Japan will be the fourth largest international freight market behind the United States (8.8 million tonnes), Hong Kong (5.4 million tonnes) and Germany (4.4 million tonnes)