Chapter 2 Development of Transport Policies Capable of Handling Internationalization

1. Expansion of International Transport Services

  (1) Problems In International Air Transportation Policy
    Japan's international air policies aim to maintain an air service that is fast, comfortable and available when necessary. However, due to major increases in demand, implementation is confronted with the following problems.
  @A need to strengthen the international air network in order to cope with the increase in demand in Japan for international services.
  A Demand for international travel is focused on metropolitan centers, however, the number of aircraft arrivals and departures is limited by restricted airport handling capacity. To counteract this, it is important to complete the construction of airports in the vicinity of metropolitan areas as soon as possible, to raise the functional level of airport facilities and to increase the number of international routes operating from regional airports.
  B Fair competition needs to be promoted in the international air transportation market.
  C An adequate response is required to user demands related to airfares. Services should be supplied that can answer the higher level and more diversified range of user needs.
  D Competition with overseas airlines can be expected to intensify in the future. This demands that Japanese national airlines raise their productivity level.
    Furthermore, training of crew personnel is also limited and effective supply of crews needs to be considered.
  E Competitiveness needs to be kept in mind as part of business development - cost competitiveness is required along with the supply of high-quality services, for Japanese airline companies in the Asian market.
  (2) Resolving Problems In International Air Transportation Policy
  (A) Strengthening the International Air Services Network It is necessary to foster customer trust through long-term stable supply of services in an international market. In reality, however, demand for international travel in Japan is concentrated in metropolitan centers, where the limitations on airports are worsening and where there is also demand for market entry from overseas airlines. In regional airports, on the other hand, the operation of overseas routes could not be considered to be adequate.
    There is anticipation of further increases in demand from airports even after completion of construction presently underway. Thus, in the medium to long-term, the present degree of limitations on airports can be expected to be continue.
    It is necessary to make an effective distribution of airport functions related to the international air network, between Japan's various airports.
  (a) Metropolitan and Regional Block Key Airports
    At the New Tokyo International Airport a high frequency of flights should be established along with a network operating in all directions around the world. This will enable the airport to satisfy the majority of demand from the metropolitan area in the future.
    However, demand for the eastern part of Japan should be distributed between airports. The New Tokyo International Airport should operate as an international hub airports and it should also handle connections from international flights.
    The Kansai International Airport should place an emphasis on medium distance flights to Asia, while satisfying demand for the Kansai region. It should also operate as an international "hub" airport (a point of connection between long flights, and medium and short distance flights), and it should also handle connections from international flights.
    Large regional airports such as Nagoya and Fukuoka should develop medium distance routes to destinations such as Hawaii and Asia.
    Airports which operate as centers for regional blocks, such as Hiroshima and Sendai, should develop short to medium distance routes.
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  (b) Structure of International Air Routes and Participation of New Airlines Under Restricted Airport Conditions
    Order of priority in structure of international air routes and participation of new airlines at the airports under restricted airport conditions such as metropolitan airports needs to be considered in order to make the most effective use of the limited framework .
    However, in airports in which such limitations do not apply, there is no need to be restricted by practical questions of equal national rights and interests between airlines. It is desirable that regular flights be established in these airports, even if they are limited to foreign airlines.
  (c) Development of Routes to Regional Airports
    In business travel there is a firm pattern of direct flights being taken to the destination point.
    Likewise, there is a tendency amongst tourists visiting Asia and other areas within a short distance to prefer direct flight (simple and easy) travel. An increase in the number of direct flights from regional airports is desirable to satisfy the needs of these business and tourist travelers. (Fig.34)
    There is expectation for airports like Shin-Chitose to function as by-direction gateways. ( *1) In order to fulfill this expectation, domestic connections should be strengthened and promotional policies established for the introduction of measures such as special connecting international fares.
  (d) Structure of Excursion Flight Routes
    There is a keen demand for excursion flights (flights on which a number of places are visited by aircraft) for Japanese tourists to medium and long distance destinations. Efficient excursion network is being established for promoting the use of code sharing ( *2), cooperation between companies and "wet lease" ( *3) in order to satisfy this demand.
  (B) Airport Construction and Raising the Quality of Airport Facilities
    The increase in demand for travel has focused on Japan's two major metropolitan areas and restricted airport conditions have worsened. Early completion of the airports servicing these metropolitan areas is extremely important (Fig.35), and construction is underway in line with the "Sixth 5-Year Airport Development Plan" (1991 - 1995).

  By-direction gateways refers to an airport which is the Japanese point of arrival and departure for flights to different directions such as North America and Asia. For example, there is an expectation that the Shin-Chitose airport should operate as the gateway for flights which tie Japan to North America.
  With "code sharing", where routes connect with Company A's own flights, but these flights are operated by B, A's name is also added to the flight name in addition to Company B's name. A then makes reservations and sells tickets on this flight, thereby strengthening its capacity to draw customers. This has the merit of increasing sales.
  "Wet lease" refers to the additional loan of crews in cases where aircraft owned by Company A are leased to Company B.

    It is necessary to further strengthen the customs, immigration and quarantine systems (C-I-Q) in these airports - to ensure they adequately fulfill their role as by-direction gateways to the nation - and to promote increases in international routes from these airports.
  (C) Promotion of Fair Competition in the International Air Transportation Market
  (a) Basic Thinking Regarding the Promotion of Competition
    The basis of government aviation policy is the long-term, stable supply of good quality air services to customers through market competition between airline companies. The government needs to ensure effective and continuous fair competition in the market and equitable air services to customers. The competitive attitude of airline company's also need to permeate the whole company and companies need to work on strengthening the quality of their constitution.
  (b) Policy for Increasing Competition
    Pluralizing Japanese airline Companies (services provided by two or three Japanese airline companies on one route) is being promoted mainly on busy routes in order to increase competition.
    This policy is being promoted further in the future mainly on high-demand routes, after making a comprehensive assessment of matters including conditions in Japanese airline companies, policies of the countries concerned and special features of the routes.
    The system for fare authorization (which allows autonomous flexible price such as a special zoning system ( *4) setting by individual airline companies) needs to be revised.
  (c) Responding to Trends in the United States and the EC
    Trends in competitive policy in the United States and the EC call for intent watching and careful response.
    This is necessary to ensure that there is no loss of advantage in the broader sense, to users in Japan's international air transportation market.
  (D) Response to Customers Demands in Relation to Fares
  (a) Improvement of the Fare Setting System
    Air service users' awareness of fares has increased in recent years. It is important to respond appropriately to user demands concerning the level and content of fares.
    The existence of discount fares has produced strong feelings of ambiguity and distrust towards airfares, and the airfare setting system requires urgent review.
  (b) Thinking Regarding Airfare Authorization
    International airfares should essentially be set autonomously according to the judgment and ingenuity of individual airline companies. However, regulations are necessary to control situations such as the rising airfare on the oilgoplistic routes, or there is major undercutting on established market prices.
    There is always the possibility that other countries may have fare setting policies which protect their national airlines. In light of this it is appropriate to have a dual fare authorization system. ( *5)

  A "zoning system" involves the automatic authorization of fares by the aeronautical authorities when they are set by airline companies within an upper and lower limit range.
  A "dual authorization system" involves international airfares becoming effective g after authorization by the countries concerned. For example, authorization of both the Japanese and British governments would be necessary before fares for flights between the two countries officially came into effect.

  (c) Flexible Implementation of Fare Authorization
    Fares should be set as flexible as possible with fare authorization. In order to maintain customers and to ensure the development of sound business operations, it is necessary to employ fare policies which are balanced and display the effective operation of market principles.
  (d) Establishing New Economy Class Fares
    New economy class airfares are being established as the present economy class fares are hardly utilized, and needs to become the standard fare that will be used for business trips and used broadly by individual travelers. New economy class fares were set in October 1991 between Japan and Europe.
  (e) Introduction of a Zoning System for Special Fares
    A zone system should be introduced for special seasonal fares (eg. group package trips and special excursion fares) and price setting should be left flexible for the airline company.
  (f) Consideration of Special Connecting Fare For Use of Regional Airports
    Special international connecting fares should be considered which to encourage departure from regional cities via by-direction gateways such as the Shin-Chitose Airport. These fares should be cheaper to customers than those for departure via the New Tokyo International Airport.
  (g) Flexibility in Charter Prices
    A comprehensive system should be structured for charter fares so that fares can be set flexibly according to nature of the charter.
  (E) Providing Services That Respond to the High Level and Diverse Nature of User Needs
    The following types of measures are necessary in responding to the high level and diverse nature of user needs and increasing the level of user convenience.
  (a) Pioneering Cost Reduction
    The majority of Japanese travelers on international flights departing and arriving in Japan are tourists.
    Consequently, they tend to be concentrated into holiday periods like Japan's Golden Week. (Fig.36) Moderately priced trips need to be offered for off-peak times in order to even out demand.
  (b) Increasing Comfort on Trips
    The period spent inside aircraft has lengthened, and consideration needs to be given to detail to make aircraft more homely and the time spent on board more comfortable.
  (c) Responding to Diversified Travel Needs
    The purpose, manner and destination of people traveling overseas have diversified. (Fig.37) Airlines need to put further efforts into grasping these newly diversified needs. They should respond by providing better air services such as establishing new routes and raising the attractiveness of the total "travel product".
  (F) Increasing the Supply Capacity And Raising Efficiency of Japanese Airlines
  (a) Need For Increasing Supply Capacity and Raising Efficiency
    In the near future, once limitations presently existing in metropolitan airports are alleviated, demand will increase. A rapid increase in supply will be needed to keep up with it. However, the capacity of Japanese airlines to supply crews is limited, so it is anticipated they will face strong competition. In light of this, it is necessary to actively work to increase crew supply capacity and raise efficiency.
  (b) Measures for Increasing Supply Capacity
    Japanese airlines should foster the development of their own crews and use foreign crews, as the need arises. Japanese airlines need also to secure diversified their supply capacity by using a method of flight entrustment to foreign airlines.
  (c) Measures for Raising Efficiency
    Raising efficiency in the supply of services of a company is made the basis. Further more, it is necessary to raise efficiency by specializing the services supplied systems coped with the demand of the specific air transportation market such as charter flights.
    It is also necessary to apply measures such as changes of aircraft parts at the use of wet leasing, code sharing and gateways.
  (G) Measures For Project Development to Raise the Competitiveness of Japanese Airlines on Short-Distance International Routes, eg. Asian Market
  (a) Necessity to Raise Competitiveness
    In the Asian market other Asian airlines can be considered more competitive due to superiority in terms of cost competitiveness and service, including fares.
    Japanese airlines need to be equally competitive as their Asian counterparts, functioning as suppliers of regular, reduced-cost services to Asian market.
  (b) Promotion of Departures and Arrivals from Regional Airports and Increases in International Charter Flights
    The number of direct international flights on short-distance routes, eg. to Asian destinations departing and arriving from regional airports should be further increased to raise customer convenience.
    International charter flights commencing from regional airports should also be increased. (Fig.38) In order to do this, the system for charter flight fares needs to become more flexible, specialist international charter companies need to be used, and the customs, immigration, and quarantine (C-I-Q) systems need to be strengthened.

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