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Airlines Oppose Cross-Subsidization of Japan’s Airports

27 June 2002

The International Air Transport Association (IATA) made clear its opposition to any plans that may be aimed at cross-subsidization of Japan’s major international airports in the privatization and consolidation process. IATA registered this opposition in a strongly worded letter to Ms. Chikage Ogi, Minister of Land, Infrastructure and Transport.

IATA contends that the landing charges at Narita are maintained artificially high and fears that profits from Narita will be used to subsidize operations at loss-making Kansai and Chubu airports. Such a scheme would be a clear violation of international standards on cost-relationship and location-specific charges set by ICAO (International Civil Aviation Organization), a UN body of which Japan is a member state.

IATA Director General and CEO, Giovanni Bisignani noted that "any structural change undertaken to airport ownership should be to the benefit not only of the operators of the airports and Governments, but also to the airlines, passengers and shippers."

Over the last 20 years, through stiff competition, airlines struggled to reduce operating costs while passing on improved service to passengers at lower prices. Seemingly immune to the competitive pressures of the industry, Narita has not achieved any cost savings resulting in reduced charges since it began operations in 1978. Narita’s user charges remain the highest in the world by an unacceptable margin.

In light of this, Bisignani strongly urged the Minister to ensure that airlines are meaningfully involved in the privatization and consolidations process and that privatization plans include a regulatory and conflict resolution scheme to prevent further abuse by the airports using its naturally monopolistic powers. "Given the competitive pressures the airlines live under, they can no longer afford to shoulder the costs associated with the airports’ monopolistic inefficiency" Bisignani warned.

In the meantime the airlines have also indicated that they expect the world’s highest landing charges at Narita to be significantly reduced in line with actual costs of providing the services.

In 2001, IATA Member airlines paid over USD6 billion in airport user charges.

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