Overview and Effects of Open Skies Policy

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Deborah Crawford
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1 Overview and Effects of Open Skies Policy Makoto Washizu Chairman, Japan International Transport Institute 鷲頭誠国際問題研究所所長

2 Topics of Today s Seminar Impacts of international air transport on tourism Open skies from European perspective Open skies from Asian perspective Before starting these speeches brief overview of policy development of international aviation. 2

Open skies from Asian perspective Before starting these

3 Outline History of Japanese Aviation Policy Elements of Typical Open Skies Bilaterals U.S. EU Open Skies Agreement Japan U.S. Negotiations Effects of Open Skies: Code Share Alliances, ATI and JVs Benefits of Open Skies Case Studies 3

S. Negotiations Effects of Open Skies: Code Share

4 History of Japanese Aviation Policy 1952 First Air Services Agreement (JPN US ASA) Traditional ASA called Bermuda Agreement Type 1985 Multiple designation of airlines 1990s Deregulations of air fares 2000 Abolishment of supply demand control in domestic market 2007 Asia Gateway Initiatives To create strategic international aviation network through Asia Open Skies To open up Haneda to more international flights 4

2000 Abolishment of supply demand control in domestic market 2007 Asia Gateway Initiatives To create

5 Elements of Typical Open Skies Bilaterals Open route rights Unlimited carrier designation No restrictions on capacity, frequencies or aircraft type Pricing determined by market forces Cooperative marketing arrangements like code sharing and wet leasing Liberal charter regimes etc. 5

aircraft type Pricing determined by market forces Cooperative

6 U.S. EU Open Skies Agreement First Stage took effect on March 30, Second Stage negotiations began in May 2008 and ended in March Agreement focuses on soft rights pledges to cooperate, coordinate and confer in the future on sensitive issues like ownership. Major changes in Agreement include: Reciprocal recognition of fitness and citizenship determinations Cooperation on environmental issues like aircraft noise and carbon trading Further expansion of market access opportunities Expansion of EU carrier access to Fly America Traffic 6

Agreement focuses on soft rights pledges to cooperate, coordinate and confer in the future on sensitive issues like ownership.

7 Japan US Aviation Relationships 1952 Japan US Air Services Agreement Imbalance between JPN/US number of airlines and traffic rights MOU Non incumbent carriers eg. ANA, NCA MOU Equalized numbers of incumbent carriers. No limit of traffic rights for incumbent carriers. Restrictions for non incumbents remained. Imbalance of slot share at NRT remained Agreement 7

1998 MOU Equalized numbers of incumbent carriers.

8 Japan US Aviation Relationships Airport capacity increases in NRT : Summer 2010 the airport capacity increases from 200 thousand flights/year to 220 thousand flights/year. HND : 2010 Oct. 4 th runway will start operation. Big Bang of Aviation Policy toward 2010 Asia Gateway Initiatives NRT to strengthen its international air network. HND to promote international air services 2010 onwards : International air services can use 30 thou. flights / year for both daytime and midnight and early morning. daytime for near Asia routes and midnight and early morning for world major cities including Europe and US Agreement Liberalized rotues, number of flights and number of airlines. Free codesharing. Simplified fare approval system. 8

HND to promote international air services 2010 onwards : International air services can use 30 thou. flights / year for both daytime and midnight and early morning.

9 Effects of Open Skies Code Share Alliances, ATI and JVs Increased Traffic Reduced Fares and Air Transport Costs Increased Economic/Job Growth 9

10 Transatlantic Markets, Changes in Average Fare, 1998 vs Source: US DOT, International Aviation Developments: Global Deregulation Takes Off (First Report) (December 1999). 10

1996 Source: US DOT, International Aviation

11 Benefits of Open Skies: Asian Case Malaysia Thailand Market Original 1969 Bermuda Bilateral liberalized over years. Increased services, frequencies and overall traffic between 2 countries. As of 2005, 1.3 million passengers traveled between the 2 countries. 370,000 due to liberalization and entry of LCCs like AirAsia. Liberalization expanded market by 37%, creating for each country more than 4,300 full time jobs and a stimulus to GDP of over US$114 million. 11

3 million passengers traveled between the 2 countries. 370,000 due to liberalization and entry of LCCs like AirAsia.

12 Benefits of Open Skies: Asian Case Shingapore Kuala Lumpur Market Liberalization in Dec LCC entered into the market and the flight fare was reduced drastically from 400S$ to 100S$. The number of tourists increased 34% in

2008 LCC entered into the market and the flight fare was

13 To open up Japanese sky to the world, to Asia. To promote open skies policy strategically with a priority on Asian countries in order to realize tourism oriented nation and to introduce new comers such as LCCs. To enhance consumers benefits through promotion of LCC. To strengthen the system to accept inbound tourists from Asian nations eg. To develop LCC terminal in the major airports.

realize tourism oriented nation and to introduce new comers such as LCCs.

14 The seminar starts NOW. 14

2. Expansion of network / Enhance Competition:

2. Expansion of network / Enhance Competition: ADVANTAGES: Africa which could lead to an increase of tourists to South Africa and the creation of new business opportunities. Trade could also benefit through the availability of new airfreight links.