VZCZCXRO5272
RR RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHFK #0047/01 2120622
ZNR UUUUU ZZH
R 310622Z JUL 06
FM AMCONSUL FUKUOKA
TO RUEHC/SECSTATE WASHDC 0206
INFO RUCPDOC/USDOC WASHDC 0001
RUEHKO/AMEMBASSY TOKYO 0215
RUEHNH/AMCONSUL NAHA 0085
RUEHOK/AMCONSUL OSAKA KOBE 0089
RUEHKSO/AMCONSUL SAPPORO 0081
RUEHNAG/AMCONSUL NAGOYA 0080
RUEHFK/AMCONSUL FUKUOKA 0227

UNCLAS SECTION 01 OF 03 FUKUOKA 000047 
 
SIPDIS 
 
TOKYO FOR ECON AND FCS 
STATE FOR E, EB AND EAP/J 
USDOC FOR ITA/IEP/OJ 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAIR ECON ETRD JA
SUBJECT: NEW KITAKYUSHU AIRPORT: GOOD START, BUT UNCERTAIN FUTURE 
 
Sensitive but Unclassified -- Not for Internet Distribution. 
 
SUMMARY 
 
¶1. (SBU) The new Kitakyushu Airport, which opened to much local 
fanfare on March 16, is facing a gradual decline in flight load 
factors as the initial novelty wanes.  According to Kitakyushu 
Air Terminal Co. President Teruaki Okuno, the airport's 
long-term success will depend on its ability to strengthen air 
cargo services and cultivate niche markets untapped by nearby 
Fukuoka Airport, Kyushu's largest.  Moreover, Kitakyushu 
Airport's role cannot be fully charted until the debate over a 
new Fukuoka Airport is settled, a process that will take several 
more years.  While Fukuoka's existing airport is near capacity, 
there is much skepticism over the accuracy of the Ministry of 
Land, Infrastructure, and Transport's (MLIT) projections for 
future passenger demand in northern Kyushu.  In addition, there 
is concern over the lack of a comprehensive strategy at both the 
national and local levels regarding regional airport 
construction.  End Summary. 
 
NEW AIRPORT'S NOVELTY WEARING OFF 
 
¶2. (U) On March 16, Kitakyushu City (Fukuoka Prefecture's second 
largest city) inaugurated a new airport located on an artificial 
island two miles offshore from the previous airport.  Built over 
12 years at a cost of 170 billion yen (US $1.5 billion), the 
facility is equipped with a single 2,500-meter runway. 
Currently, scheduled services include one international 
(Shanghai) and three domestic (Tokyo/Haneda, Nagoya, Naha) 
destinations, including 12 daily roundtrips to Tokyo by Star 
Flyer, a start-up carrier with financial backing from the 
Kitakyushu business community.  While modest, these operations 
are nevertheless a big improvement over the old airport, which 
only offered limited service to Tokyo/Haneda.  Kitakyushu 
officials have forecast one million passengers in the airport's 
first year of operations on the assumption that: 1)  Kitakyushu 
residents who use Fukuoka Airport will largely switch to the new 
facility, and 2) the new airport will draw additional passengers 
from Fukuoka, Yamaguchi, and Oita prefectures. 
 
¶3. (SBU)  According to statistics obtained from Kitakyushu Air 
Terminal Co. (KATC), the airport's operating authority, users of 
the new airport totaled some 370,000 between March 16 - June 30. 
 On domestic flights, these figures resulted in an average load 
factor of 55.7% per flight.  If this level of usage is 
maintained, the one-million-passenger forecast should be easily 
achieved in the first year.  However, KATC President Teruaki 
Okuno told post it is still too soon for Kitakyushu to claim 
success.  Specifically, he noted that it is not yet clear 
whether the new airport is drawing passengers from Fukuoka and 
elsewhere, or creating new demand.  He also pointed to the trend 
of the load factors (L/F) on all three domestic routes steadily 
declining with the waning of the airport's novelty: 
 
Period                      3/16-5/7                    3/16-5/31 
3/16-6/30 
Destination             L/F(%)                  L/F(%) 
L/F(%) 
 
Tokyo/Haneda            60.7%                   58.1%                   55.2% 
Nagoya                  67.6%                   62.2%                   57.5% 
Okinawa         69.7%                   64.5%                   62.8% 
 
Average L/F             61.4%                   58.6%                   55.7% 
 
Okuno indicated that China Southern Airlines' service to 
Shanghai (three weekly roundtrips) has fared even worse, with 
load factors hovering under 40% most likely as a result of 
inconvenient afternoon flight times for business travelers. 
 
 
KEY TO SUCCESS - DIFFERENTIATION FROM FUKUOKA 
 
¶4. (SBU)  Okuno opined that in order for Kitakyushu Airport to 
succeed in the long run, it must: 1) take advantage of its 
24-hour operations to strengthen cargo services, and 2) 
cultivate niche markets untapped by Fukuoka Airport.  In both 
cases, the key is Kitakyushu Airport's ability to differentiate 
itself from the much larger Fukuoka Airport, where nighttime 
operations are restricted because of its close-in urban 
location. 
 
¶5. (U) New cargo carrier Galaxy Airlines is scheduled to 
 
FUKUOKA 00000047  002 OF 003 
 
 
inaugurate late-night service between Kitakyushu and 
Tokyo/Haneda later this year.  China Southern also plans to add 
cargo services to Shanghai starting this summer.  To facilitate 
these services, MLIT has approved the extension of Kitakyushu's 
operations to a full 24 hours.  This new competition poses 
concerns for struggling Saga Airport, which opened in 1998; Saga 
recently carved out a successful niche for itself by offering 
northern Kyushu's first nighttime air cargo service to Tokyo. 
In terms of new passenger services, Russia's Vladivostok 
Airlines is awaiting MLIT approval to operate 
Kitakyushu-Vladivostok flights twice a week during the summer 
months. 
 
CONTINUING CONTROVERSY:  A NEW AIRPORT FOR FUKUOKA? 
 
¶6. (U) According to Okuno, Kitakyushu Airport's future course 
cannot be fully planned out until the long-standing debate over 
whether to build a new airport for Fukuoka is settled.  The 
existing Fukuoka Airport, located close to the city center, 
handles nearly 19 million passengers a year and is near 
capacity.  The airport ranks first in Japan in the frequency of 
per runway takeoffs and landings (137,510 in 2005) from its 
single 2,800-meter strip.  MLIT growth projections released in 
early June show Fukuoka far exceeding its effective capacity in 
takeoffs/landings by 2012, with large increases in passenger 
numbers. 
 
¶7. (U) MLIT's projections are part of a joint research project 
initiated in 2003 with Fukuoka prefecture and city to assess 
future demand at Fukuoka Airport.  The committee is expected to 
decide by the end of JFY 2007 (i.e., March 2008) whether to 
recommend the construction of a new airport.  If a 
recommendation for construction is made, that result may be 
included in the GOJ's National Airport Improvement Plan for JFY 
2008-2012.  Other alternatives being suggested are an expansion 
of the current airport or greater cooperation with the 
neighboring Kitakyushu and Saga airports to divide up the 
northern Kyushu market. 
 
¶8. (SBU) All of these options face substantial obstacles.  The 
cost of building a new airport, assuming a suitable location can 
even be found, may be prohibitive.  For environmental and safety 
reasons, expanding the current airport - which would require 
further encroachment into the surrounding, densely built-up 
urban area - also does not appear feasible.  And while officials 
have talked about "cooperation" among the region's three 
airports, no one has provided any concrete ideas on how that 
would work. 
 
¶9. (SBU) Since the argument that Fukuoka needs a new airport is 
premised in part on expectations for future growth, MLIT's 
projections are drawing heightened scrutiny.  MLIT forecasts 
growing demand for international traffic as a result of economic 
growth in, and stronger business ties with, other Asian 
countries.  It also foresees a continuation of the recent trend 
toward using smaller aircraft (with a big resulting rise in the 
frequency of takeoffs/landings).  However, industry observers 
are skeptical, as the growth in the frequency of 
takeoffs/landings and the number of passengers at Fukuoka 
Airport have leveled off in recent years.  Furthermore, Ministry 
of Public Management, Home Affairs, Posts and Telecommunications 
(MPHPT) data show that nine of the fifteen Japanese airports 
which opened or expanded from 1989-1999 have performed below 
MLIT's projections.  At four of these airports the level is less 
than 50% of what was projected. 
 
¶10. (SBU) Okuno criticized the debates over airport construction 
in Kyushu as politically charged.  He said the issue illustrates 
the drawbacks in Japan's existing administrative structure, in 
which big projects like airports have been pursued for parochial 
political interests with little connection to real economic 
need.  He also opined that airport projects should be undertaken 
more strategically and efficiently in a broader administrative 
framework, such as the "doshusei" proposals to combine existing 
prefectures into larger regional blocs.  This would shift the 
issue beyond prefectural jurisdictions to better promote both 
regional and national economic interests, he underscored. 
 
COMMENT 
 
¶11. (SBU) The debate over the construction of a new northern 
Kyushu "hub airport" centered on Fukuoka has been bogged down 
for years due to squabbling among the governors and prefectures 
involved.  Despite Okuno's criticisms, airport construction will 
 
FUKUOKA 00000047  003 OF 003 
 
 
primarily remain a political rather than economic issue in 
Kyushu.  For instance, Fukuoka Mayor Hirotaro Yamasaki is the 
primary mover behind Fukuoka's bid to be Japan's candidate for 
host city of the 2016 Summer Olympics, and he has publicly tied 
the Olympics bid with the need to build a new airport in 
Fukuoka.  Local cynics point out that, even if Fukuoka were 
selected for the Olympics, getting agreement on a new airport 
and completing construction could not be accomplished by 2016. 
Still, building a new airport will be part of Mayor Yamasaki's 
campaign for re-election in November 2006.  End Comment. 
WONG