Notable Decrease in the Competitiveness of International Air Cargo Transport

Notable Decrease in the Competitiveness of Japanese Airports and Airlines

The major Japanese airlines transporting international cargo are Japan Airlines, Nippon Cargo Airlines and All Nippon Airways. In terms of transport volume of international cargo (based on weight and distance), all three fell in the international airlines rankings from 1995 to 2006 including a drop from 6th to 13th for Japan Airlines. On the other hand, the surge of airline companies from Asian countries such as South Korea, Singapore and Hong Kong was remarkable, as exemplified by Korean Air’s march to the top of the rankings. In the background of this rise of Asian airlines is a significant increase in cargo transport from Asia to North America and Europe as well as within the Asia region.

Gateway Airport: Necessary to Realize the Goals of the Asian Gateway Initiative

The first goal of the Asian Gateway Initiative, which was announced by the Abe Administration in May 2007, is the realization of new “creation and growth” in Japan that incorporates growth and vitality of Asia as a whole. Policy change towards the liberalization of aviation tops the list of the ten most critical items cited under this initiative. This includes changes in passenger aviation as well as in international air cargo transport.

To achieve the Asian Gateway Initiative goals in the field of international air cargo transport, it is necessary to establish a gateway airport in Japan that handles international cargo. Movements towards the establishment of such international cargo gateway airports in other Asian countries such as South Korea, China, and Singapore are gaining momentum as well.

The following are merits of establishing a gateway airport in Japan. 1. Direct investment into Japan such as companies setting up distribution centers will be promoted. 2. Japan becomes a trade hub within Asia, making it easy for global companies to establish Asian regional headquarters in Japan. 3. Various transport options to the gateway airport such as trucking and railway will become available, and this will lead to a reduction of distribution costs for Japanese companies. The first two of these merits should generate domestic production and employment.

Efforts towards Desirable Improvements in Competitiveness

To establish an international cargo gateway airport in Japan, it is necessary to curb the drop in the competitiveness of airports and airline companies and bring about a swing towards improvement.

Efforts towards improving competitiveness have begun in airline companies. Excluding Nippon Cargo Airlines, which specializes in cargo transport, the three major Japanese airlines have traditionally placed passenger flights as their primary business and have not been aggressive in handling cargo. With its aging equipment, Nippon Cargo Airlines has not been in a position to expand operations.

In line with the robust increase in air cargo around Asia, however, ANA placed cargo mail as its third core business in the “ANA Group Mid-term Business Strategy (2005-2007)” announced in February 2005, and is endeavoring to increase its fleet of cargo airplanes. JAL has also started to expand its cargo fleet and switch to lower-cost and more fuel-efficient equipment since 2006. Nippon Cargo Airlines became a subsidiary of Japan’s shipping giant Nippon Yusen Kaisha (NYK), and is upgrading its systems to expand business. In this way the three airlines are striving to strengthen their competitiveness. The fact remains, however, that the combined total of cargo airlines operated by the three airlines stands at 27(end of 2006), or one less than Korean Air’s fleet of 28. The efforts of the major Japanese airlines are therefore insufficient, and further response is needed.

Regarding the competitiveness of Japanese airports, it is doubtful that the high landing fees compared to other Asian countries/regions will be lowered. Further, while the upper limit on Narita airport departures/arrivals will be raised from 200,000 to 220,000 in 2010 as a result of runway extensions, the effect on cargo flights will be marginal as the increase will primarily be used for passenger flights. Haneda airport will also see an increase in departures/arrivals from 296,000 to 407,000 with the construction of new runways, but the majority will be allocated to domestic flights, and the additional 30,000 international flights are expected to be limited to nearby Asian countries.

Kansai International Airport, on the other hand, opened its second runway in August 2007 and still has plenty of room under its departures/arrivals limit. Moreover, it has become Japan’s first 24-hour airport. To strengthen the competitiveness of Japanese airports in areas such as international air cargo transport, a quick implementation of measures, such as one that will utilize the advantages of Kansai International Airport, is desirable.