The talks taking place this week in Washington, DC, to negotiate an “open skies” agreement with Japan are an interesting component of American Airlines and Delta‘s dogfight for the right to partner with Japan Airlines (JAL).
An open skies agreement between the US and Japan would lift restrictions on which airlines from each country can fly in and out of Tokyo, especially at Narita Airport. The US forged a similar open skies agreement with the European Union that took effect in 2008. These type of arrangements between the US and other countries have been taking place since the late 1970s when the US deregulated its airline industry, offering consumers more choices and lower fares.
Japanese officials haven’t been really interested in an open skies pact until recently. The catalyst: JAL, the country’s flagship airline, is hemorrhaging profits. Second-fiddle All Nippon Airways (ANA) isn’t doing so hot either. The time is now for JAL and ANA to be able to forge better partnerships for trans-Pacific flights, aka revenue streams.
American Airlines and investment firm TPG have offered $1.1 billion to JAL to help it stay in business. JAL is already a member of the Oneworld alliance, led by American and British Airways. Not to be outdone, Delta has offered $1 billion if JAL will switch to its SkyTeam alliance, which also includes Air France-KLM.
Even without an open skies accord, Delta and United Airlines (a leader in the Star Alliance) have a foothold in flying to and from Japan. While an open skies agreement would be more favorable to other US carriers (especially American), Delta and United want it, too. That’s because an open skies accord is the linchpin in more profitable trans-Pacific partnerships.
The US Department of State is negotiating the open skies deal, which Japanese officials say they won’t activate until the US Department of Transportation approves the antitrust immunity applications JAL, ANA, and their US partners have submitted. (All Nippon is seeking a deeper trans-Pacific partnership with fellow Star Alliance members United and Continental.)
Naturally, the DOT says it won’t grant antitrust immunity until there’s an open skies agreement in place. But even if it is signed, that doesn’t make immunity guaranteed.
You may be wondering why antitrust immunity is needed if JAL is already code-sharing with American and All Nippon is doing the same with United. With that immunity, airlines can form joint ventures to not only sell tickets on one another’s flights (code-sharing) but also combine some operations and share profits.
American will be sitting pretty if it can get JAL to stick with Oneworld and an open skies agreement is signed with Japan followed by antitrust immunity approval. Delta will dominate the marketplace (of US carriers flying into Japan) if JAL switches to SkyTeam and the other pieces fall into place. In any case, it’s going to be interesting to see who comes out on top.
I hate to see the US airline industry make any in roads with ANA and JAL. Both airlines offer customer service levels far exceeding anything that the US based airlines could ever hope to attain. The Open Skies agreement will destroy ANA and JAL as they will be forced to compete in the same arena as Delta, American, Continental and United which focus on profit first and customer service last. I flew Delta for the first time in 5 years last month on a flight to Tokyo and it by far was the worst flight of my career. The plane was filthy, the flight attendants could have cared less about providing customer service and making the in flight experience enjoyable. I have lived long enough to remember when the “Made in Japan” label was associated with cheap, poorly made goods here in the US. However, the US airline industry’s customer which could be the new moniker “Made in America” label and is a toxic poison that will destroy JAL and ANA if they are forced to abandon their legendary levels of Customer Service to compete with Delta, American, etc. I can’t imagine a worse form of business cancer than to allow the US Airline Industry to pervade the Asian markets.
looks like the open skies agreement has been made and pending government approval…
http://www.nytimes.com/2009/12/12/business/global/12air.html?_r=1&emc=eta1