1995 Reports

Air transport policy in Japan

Yamauchi, Hirotaka; Ito, Takatoshi

This paper reviews the development and status of the airline industry of Japan and the points of debate in the recent Japan-U.S. airline dispute. Until 1986, international routes were given only to Japan Air Lines, while domestic routes were dominated by All Nippon Airways, with minor shares given to JAL (major routes only) and Japan Air System (local, short-haul routes only). A policy change in 1986 allowed the three airlines to mutually expand into each other's routes. Major deregulation on airfares did not come until 1995-96. The original Japan-U.S. treaty of 1952 was "unfair" in the sense that the U.S. carriers were given more freedom than their Japanese counterparts, especially in "beyond rights." The amendments of 1982, 1985, and 1989 expanded the routes of Japanese airlines (JAL and new entries of ANA and JAS) as well as those of the new U.S. entrants (American and Delta). However, disputes remain between the two countries over routes, frequencies of flights, and beyond rights. Interestingly, these disputes are not always divided along national boundaries: Carriers with large market shares (JAL, United, Northwest and FEDEX) have an incentive to stall negotiations, while restricted carriers (ANA, Nippon Cargo Airlines, AA, DL, Continental, and UPS) are eager to open negotiations in order to expand their routes.