This photo of Air Force One taxiing at Haneda Airport shows just how close that airport is to ... [+]
Gen. Douglas MacArthur may be rolling over in his grave today, but for travelers who fly between the U.S. and Japan – and all of Asia – that probably is a good thing.
In his role of post-World War II Military Governor and de facto American Emperor of Japan MacArthur negotiated/imposed an air services treaty that was heavily stacked in favor of two airlines – Pan American and Northwest Orient – that served as America’s chosen instruments of economic and cultural reach to Asia. Now negotiators from the United States and Japan effectively have wiped out the last few vestiges of MacArthur’s formerly lop-sided deal.
The U.S.-Japan Air Services Agreement was amended formally in Washington on Wednesday to allow all four U.S. airlines now serving Japan – United, Delta, American and Hawaiian - to move some or all of their services from Narita International Airport nearly a hour’s train ride northeast of Tokyo back to close-in Haneda Airport. No U.S. carriers were allowed to serve Haneda for 32 years, from 1978 to 2010. And there has been only very limited U.S. carrier service allowed there over the last nine years. Now that’s about to change.
It’s easy to understand why MacArthur, were he still alive, might not like the idea of the economic and transportation regime he created purposely to favor U.S. interests being dismantled. But why should air travel consumers today be happy about it?
Well, beyond the obvious – Haneda is 15 minutes from central Tokyo by light rail or taxi vs. the hour (or sometimes much more) that it takes to get there from Narita – the reopening of Haneda Airport to significant service to and from the United States paves the way for new – and likely – lower priced – competition. And that new competition will impact not only on the lucrative U.S.-Tokyo routes that cater mostly to high fare-paying business travelers but also routes between the U.S. and pretty much everywhere else in Asia, where demand among price-sensitive tourists is growing rapidly.
In fact, in many respects, the newly amended U.S.-Japan Open Skies deal merely recognizes the new era of trans-Pacific air travel competition that slowly has been growing since the late 1990s - and quite rapidly over the last half-dozen years.
The new deal will also allow United (which acquired Pan Am’s historical Pacific rights back in the 1980s), Delta (which acquired Northwest’s trans-Pacific network via their 2008 merger), American and Hawaiian to shift a dozen flights a day from Narita to Haneda. Doesn’t sound like much, does it? But when you consider each on of those flights carries more than 300 passengers, that means something more than 3,600 travelers a day – and 1.3 million a year - will be landing close to downtown Tokyo instead 50 miles out in the suburbs. That’s a big game changer all by itself.
Beyond that Delta, which despite its acquisition of those once-extremely valuable Northwest rights to serve Japan and, through it, the rest of Asia, already has said it’s going to withdraw all service from Narita and serve only Haneda.
United and American, which have big global alliance partners in All Nippon Airways and Japan Airlines, respectively, will continue for now to serve both Tokyo airports. They’ll exchange travelers headed to or from other Asian nations with their Japanese alliance partners at Narita. And they’ll exchange those people flying to or from other Japanese cities at Haneda, even as most of their Haneda passengers will simply be beginning or ending their flights there.
Meanwhile Hawaiian, which makes a good business out of flying Japanese and other Asian tourists to one of their most preferred vacation destinations, the Hawaiian Islands, will now simply have more access to that specialized market.
The Narita-to-Haneda shift also points to big advances in aviation technology, Asian economics and international trade relations.
For the first 50 years after World War II most air travelers journeying between any point in the United States and any point in Asia passed through Tokyo. Pan Am and Northwest built huge service networks on either side of Japan to funnel travelers from the Asian mainland, the Pacific Islands and even Australia through Tokyo to flights bound for the United States (and vice versa). JAL and ANA did much the same. Thus, those four dominated the trans-Pacific market, which was for most of that time much smaller than it is today because of the physical constraints and Asia’s relative lack of economic development. Tokyo thus became an international connecting hub long before the term “hub” entered the vocabulary of American travelers in the early 1980s.
But as Asia’s markets matured and liberalized over the last quarter century, and as airlines formed and then gradually learned how to fully exploit their global alliance partnerships’ demand for seats over the Pacific, in both directions, exploded. Meanwhile, Boeing and Airbus brought new, large and much more economic-to-fly planes like the 777 and 787 and the A330 and A350 to the market with the size, range and operating economics needed for carriers to bypass the traditional connecting point of Tokyo. In 2000 a whopping 65% of all trans-Pacific travelers either were destined to or passed through Tokyo. Today just 31% ever touch down in Japan, even though the total number of U.S.-Tokyo travelers is way up over that same time frame.
Note also that the giant Airbus A380 was created largely to serve very long trans-Pacific routes. It proved to be so uneconomic to operate that Airbus already has announced the plane will go out of production by 2021, just 14 years after it first entered service. Still, it played a critical role in generating huge amounts of demand for nonstop service between North America and Australia, Oceana and the more distant parts of Southeast Asia. And that demand promises to long out-live the A380 itself.
That illustrates that while Japan remains a very popular air travel destination and starting point, it no longer is the key to Asia. Seoul, Hong Kong, Shanghai and Beijing all have plenty of non-stop flights to and from the U.S. even as carriers near completing phase out of their old, not-so-economic Boeing 747s. And the airlines with hubs in those locations are offering an ever-growing menu of other Asian destinations to which travelers arriving on U.S. carriers may connect.
Actually, Delta decision to abandon Narita in favor of Haneda tells us most of what we need to know about the change in the competitive structure of the huge trans-Pacific market. Without a Japanese-based member of its SkyTeam Alliance, Delta is free to treat Japan as a pure “O&D,” or “origin and destination” market. It sends nearly all of passengers bound for other Asian destinations over its SkyTeam partners’ hubs in South Korea, China and even Vietnam.
United still has ANA, a fellow Star Alliance member, and American continues to partner with JAL. So both have good reason to treat Tokyo as both an O&D and a connecting market. But both carriers now offer more service, either on their own planes or on the planes of non-Japanese members of their alliances to literally dozens of other Asian cities. It’s a delicate balance, providing connecting opportunities at Tokyo for their Japanese alliance partners’ passengers seeking rides to and from the U.S. (even though both ANA and JAL have lots of U.S. flights of their own) while also being good partners to alliance members based elsewhere in Asia. But United and American now have greater opportunity to market even more of their Tokyo seats to the kind of business travelers who generate outsized revenues and much of the carriers’ profits.
So, how does that help consumers, especially American travelers bound for Japan or elsewhere on the western side of the Pacific?
Well, the movement of planes – and thousands of passengers a day – from Narita to Haneda – opens space at Narita for more planes to back-fill the runway and terminal capacity being vacated by Delta, United, American and Hawaiian. A couple of years ago Narita officials opened a whole new terminal designed for the use of lower-cost “discount” airlines and their scaled-back operating processes. And if more of them now see opportunities at Narita that they can exploit they not only will fill up that new terminal, the folks at Narita would be more than happy to remodel some of their older existing terminals to accommodate international discounters and others seeking to provide new and different service across the Pacific.
And, over time, that likely will keep downward pressure on fares, especially coach fares aimed at leisure travelers/vacationers.
For more than a decade now air travel within the Asian market has been growing near or above the 10 percent-a-year mark. Even across the last year, with China and the U.S. engaging in a trade spat featuring new tariffs and lots of economic threats, travel both in China and throughout Asia has continued to grow at rates above the global average. And most people in Asia, unlike those of us who live in the West, still have never flown on a plane. That, of course, will be changing because of the population and economic growth trends there. Thus, there’ll be plenty of opportunity for lower cost airlines to get into and grow in the trans-Pacific markets. That, in turn, will force the big established carriers to keep at least some of their coach seats priced competitively.
MacArthur’s post-WWII air services treaty may have been appropriate in its day. Though it clearly favored the U.S. it did encourage U.S. airlines to take what were, at the time, huge economic risks in building very long, hard-to-support service networks over the Pacific that fueled not only their own growth but the economic recovery of Japan in the 1950s through at least the early 1980s. But deregulation in the U.S. beginning in the late 1970s taught both sides about the bigger opportunities that could be created by shifting from a mercantilist-style regulatory regime to something closer to a free market approach. Once markets reach a certain level of maturity within a mercantilist framework, a switch to a more aggressive, price-based style of competition aimed at attracting lots of discretionary and individual travelers – tourists mostly – on top of the mature business travel crowd tends to spur very rapid market growth.
The amended U.S.-Japan Open Skies deal signed Wednesday pretty much does that. And in the process it drove the final nail in the coffin of MacArthur’s now outdated mercantilist economic approach to building the trans-Pacific air market. To be sure, increased price competition likely means there’ll be some additional financial chaos in the trans-Pacific airline business in the years ahead. But consumers on both sides of the world’s largest ocean will reap huge benefits over many, many years to come.
