Today, Japan Airlines and Japan Air System received the approval of the Fair Trade Commission (FTC) to integrate their businesses, leading to the creation of a more competitive domestic aviation market in Japan and aiming for a stronger corporate structure to better compete in the global aviation industry.
On March 15, the Fair Trade Commission had pointed to a number of issues, especially related to the domestic passenger market, where they had concerns.
After studying their concerns, on April 23 JAL and JAS submitted revised proposals, based on the FTC's comments.
Now we have the approval of the FTC we can now proceed with seeking the approval of the shareholders of both companies at our respective annual general meetings of shareholders in June. Following that, we intend to proceed with our plan to form a new holding company in October, the Japan Airlines System Ltd., as the new JAL Group.
We expect that the combined synergy of both companies will create a new airline in the top rank of the world's airline industry, capable of facing the competitive challenges of the 21st century and firmly founded on safe and reliable operations.
JAPAN AIRLINES AND JAPAN AIR SYSTEM INTEGRATION
Revised proposals in response to issues raised by the Fair Trade Commission
I. MEASURES FOR ENHANCING COMPETITION OF THE AIRLINE INDUSTRY
JAL and JAS have agreed to take the following measures.
1. Return of 9 turnaround (18 single) slots at Haneda Airport for new entrants at the time of integration.
In addition, three turnaround (6 single) Haneda slots will be returned at the time of slot reallocation in February 2005, if the 18 slots are not sufficient for new entrants.
2. Provide facilities for new entrants, including boarding bridges and gate spots
(1) Boarding bridges and gate spots
HANEDA AIRPORT
(a) The current JAL/JAS group will provide gate parking spots for approximately 50% of total flights for one new entrant airline at Haneda's West Terminal, which is almost the current ratio of utilization by JAL and JAS.
(b) The current JAL/JAS group will also provide gate parking spots for other new entrants in a similar manner, after the opening of the new, East Terminal.
OTHER AIRPORTS
The same concept will be applied at other airports when new entrants wish to use gate parking spots
(2) Check-in counters and offices
HANEDA AIRPORT
(a) JAL/JAS will provide check-in counters for one new entrant carrier at the West terminal if a self-handling counter is requested
(b) The reallocation plan of the new East Terminal is still pending but availability of airport facilities is expected after it opens. Nonetheless, JAL/JAS will cooperate with new entrants and provide necessary assistance.
OTHER AIRPORTS
JAL/JAS will consult with regard to the provision of offices or airport facilities for new entrants at other airports if requested.
(3) Maintenance area (hangar) at Haneda Airport
JAL/JAS will lease maintenance hangar space to new entrants if requested to do so for the purpose of aircraft overhaul maintenance carried out by the new entrants, taking into account JAL/JAS own aircraft maintenance schedules.
In the case that a new entrant wishes to acquire their own dedicated hangar in future, JAL/JAS will agree to plan a new maintenance hangar as a dedicated site for the new entrant.
3. Cooperation in ground handling service for new entrants.
JAL/JAS will provide ground handling services such as ramp service, maintenance, flight operations and any other necessary services required by new entrants, for starting business or business expansion.
II. ROUTE SYSTEM AND COMPETITIVENESS
A result of the JAL/JAS integration will mean a reduction of flights on routes currently served by JAL and JAS. The slots freed by this rationalization will be used to provide competitive flight services on routes that are currently monopoly routes or where the level of service by one single carrier now greatly exceeds flights currently offered by JAL or JAS. This will enhance competition and will benefit travelers on such routes in future.
III. MORE COMPETITIVE FARES
1. Basic fares
From October this year Japan Airlines including its domestic subsidiary JAL Express and Japan Air System will reduce basic fares in the area of 10%. This takes in to account the FTC's contention that the merger should be of tangible benefit to the consumer. JAL/JAS will not increase fares in principle for a period of three years, unless unforeseen economic circumstances arise.
2. Competitive Discount fare structure
As JAL/JAS will be launching services on routes where there is now a monopoly or where one carrier dominates the market, they will introduce the same type of discount fares currently offered on other routes where there is already a more competitive environment. As a result, passengers on these former monopoly routes will benefit from the increased competition provided by the merger.
(1) Route and/or flight specific discount fares expansion
The new fare expansion will apply in principle to all domestic routes, the exceptions being flights to remote islands, domestic routes serving Narita Airport and services using aircraft with less than 50 seats.
No exception will be made for routes currently operated only by JAL or JAS i.e. Haneda-Memambetsu (JAL) or Haneda-Tokkachi/Obihiro (JAS). The discount rates on these routes should be similar to the rates on routes now served by the three major carriers.
(2) Advance purchase fares usage - expansion
Advance purchase fares currently marketed by both carriers will be greatly expanded in use to more routes. Currently such fares are only available on less than 60% of domestic routes operated by two to four carriers.
IV. OTHERS:
JAL/JAS will periodically report their progress in compliance with the FTC's requirements. |
