Air Transport World

Testing reform in a mass market. (Japanese airlines)(Industry Overview)

Wonder of all wonders, the Japanese government actually is loosening its vise-like grip--slightly--on the domestic airline market. And while some still complain about the extent of regulation that remains, no one expects the Ministry of Transport to embrace deregulation fully anytime soon, given the culture and history of protective linkups between industry and government.

"We must deregulate or die," a government bureaucrat told ATW. But the manager works at the Ministry of International Trade and Industry, and MITI does not regulate Japanese airlines--MOT does--and the MITI manager ranks MOT just as "ultraconservative" as the infamous Ministry of Finance. A 1994 article on MOT in Tokyo Business magazine calls it the "Ministry of Tyranny," and accuses it of "bureaucratic megalomania and rampant regulatory rampages." Even a Japanese airline official calls MOT "feudalistic."

Differences in attitudes between MITI and the MOT are simple: The international market. The strong yen makes Japan's exports increasingly uncompetitive, so MITI, in opposition to the Finance Ministry, wants Japan to dump its costly regulatory structure to help keep goods flowing abroad. So change there is. But slow.

The loosening began in 1986, when international scheduled routes were awarded to a carrier other than Japan Airlines, first to All Nippon Airways and then Japan Air System. In addition, the number of carriers flying certain domestic routes was increased. Then, the government began reducing international fare regulation.

As in other business sectors and in agriculture, the actions resulted mostly from outside pressures: Non-Japanese airlines wanting rights to the country or charging international fares that made the Japanese uncompetitive.

But outsiders cannot challenge Japanese airlines on their own turf. So MOT retains control of domestic routes, rates and travel agent licensing. Japanese airlines do very little without asking MOT. And MOT does very little without asking its airlines. While MOT and its airlines promote some wriggle room, the road to deregulation seems long, indeed.

The pace of change reflects both the Japanese government's method of operating as well as the attitude of its industry. Neither wants to get too far out in front of the other. The government does not want to impose policies that would cause airline upheaval, while the industry wants to maintain smooth relations with its regulator.

This situation is reflected in discussions with all parties. The three companies react toqueries by listing regulations of slots, routes and frequencies that they would like to see relaxed. None, including the relatively aggressive ANA, promotes fare deregulation. An ANA official notes: "When deregulation is discussed, most industry people support it. But when they discuss how to introduce it, everyone changes his attitude. …

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