Fraction too much friction

But when 16 international slots at Haneda came up for grabs for use from next year JAL was dumbfounded to be told the government is giving 11 of them to major rival All Nippon Airlines (ANA) and only five to JAL.

It immediately asked the government to clarify the rationale behind the decision, the first time an airline has ever done so.

“We sincerely regret that we cannot accept this. JAL will proceed to formally seek a rational explanation and a correction of the content of this allocation,” the carrier said in a statement. Ueki went further. Asked if legal action was possible, he said it was “one of the steps we might take in the future”.

In Japan, where landing slot shortages at all major hubs has been a major issue for years, the decision to give such a favourable allocation to ANA has wider ramifications. It represents a major victory for the Star Alliance, of which ANA is a member, at the world’s fourth busiest airport and conversely, a setback for JAL’s oneworld alliance.

The new slots became available after the opening of a new runway at Haneda and with no more new runways or airports planned for Tokyo the ruling will probably be the last major slot distribution for years.

As always, there are two sides to this tale. ANA lobbied hard to get a bigger share of the landing rights, arguing it had been put at a competitive disadvantage by a $3. 5 billion government-led bailout of JAL after it went bankrupt in early 2010. That had wiped out most of JAL’s debt and left it with tax credits that gave it the financial clout to beat ANA in any price war.

There’s evidence to suggest it may have a case. In the quarter ended June 30, JAL, which emerged from bankruptcy protection in March 2011, made an operating profit of $224. 2 million, while ANA posted a $57 million operating loss.

The Japan Civil Aviation Bureau (JCAB) apparently agreed. It said the two-to-one handout in ANA’s favour, including routes to Vietnam, Germany, Indonesia and the Philippines, would level the competitive

. . . competition issues should be settled through means other than slot allocations.

playing field. JAL’s revival, said JCAB director Shigenori Hiroaki, had “resulted in a very big difference in the financial standings of JAL and ANA”. It hardly came as a surprise that ANA welcomed the ruling. “This will help close the competitive gap between ANA and Japan Airlines,” said ANA’s chief executive Shinichiro Ito.

JAL’s Ueki, clearly bristling with indignation, complained the government’s decision was “opaque and irrational, and left key points unexplained”, words that have to be viewed in the light of a market in which airline companies rarely criticise politicians and regulators.

“There are times when you will take actions because you are trying to achieve a particular result, and sometimes you will take actions even knowing that you might not be able to get a particular result,” said Ueki. “Sometimes things have to be said, sometimes things have to be done. ” Privately, JAL officials also suggest politics have been at play in the background to the decision. ANA, they say, has won the favour of Abe’s ruling Liberal Democratic Party, which was in opposition when JAL was rescued. They also argue the government-led bailout should have played no part in the decision because it wasn’t really a bailout at all. It was actually a loan that has already been repaid and has cost Japanese taxpayers nothing. Besides, they say, competition issues should be settled through means other than slot allocations.

Behind the scenes, it has not only been a battle between ANA and JAL. Oneworld members including British Airways and American Airlines had asked Japan to consider its grouping when deciding how to share the landing rights.

No wonder. As it stands, the new allocation will next year lift rival Star Alliance’s share of daytime international flights to 52 per cent and lower the share of oneworld from around 33 per cent to about 25 per cent.

Whether the government even reconsiders its decision on the Haneda slots remains to be seen. What is certain is that the battle is far from over. Four more slots for destinations to the US have yet to be decided. JAL for one will be expecting a balancing of the books.