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RR RUEHFK RUEHGH RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #1021/01 1210647
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R 010647Z MAY 09
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 2710
INFO RUEHBJ/AMEMBASSY BEIJING 9097
RUEHRL/AMEMBASSY BERLIN 1638
RUEHBY/AMEMBASSY CANBERRA 3159
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RUEHFK/AMCONSUL FUKUOKA 3814
RUEHKSO/AMCONSUL SAPPORO 4351
RUEHGH/AMCONSUL SHANGHAI 0579
RUEHIN/AIT TAIPEI 7328
RUEHBS/USEU BRUSSELS
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 03 TOKYO 001021 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/J, EEB/TRA FOR DAS BYERLY 
STATE PASS COMMERCE FOR D. LEE AND K. ROTH 
STATE PASS USTR FOR AUSTR CUTLER AND M. BEEMAN 
 
E.O. 12958: N/A 
TAGS: EAIR EIND ETRD WTRO EFIN PGOV JA
SUBJECT: JAPAN'S EFFORTS TO ASSIST ITS AILING AIRLINE 
INDUSTRY 
 
REF: TOKYO 850 
 
¶1.  (SBU) Summary:  The Ministry of Land, Infrastructure, 
Transport and Tourism (MLIT) released its "Support Package to 
Strengthen the Foundation of the Airline Industry" April 10, 
a set of initiatives to assist Japan's struggling airline 
sector.  The support package does not require Diet approval 
and is separate from the GOJ economic stimulus plan that was 
announced the same day.  Many of the measures listed are not 
new and, according to MLIT officials, no special funding has 
been allocated for the package.  The package aims to increase 
airline profitability, reduce costs to airlines and airports, 
maintain the air transport network, and respond to airlines' 
demand for additional credit.  Executives from U.S. airlines 
foresee no direct benefits from the package for their 
respective carriers.  End summary. 
 
¶2.  (SBU) The Ministry of Land, Infrastructure, Transport and 
Tourism (MLIT) released April 10 its "Support Package to 
Strengthen the Foundation of the Airline Industry," a set of 
initiatives to assist the ailing airline industry; MLIT 
published the report in response to an earlier request from 
the Scheduled Airlines Association of Japan.  (Note:  The 
Association, which represents Japan's airlines, wrote to MLIT 
February 5 seeking emergency support for the airline 
industry.  End note.)  No special funding has been allocated 
for the package, nor does it require Diet approval, MLIT 
Japan Civil Aviation Bureau (JCAB) Administration Department 
Aviation Industries Division Policy Planning and Coordination 
Director Orihara told econoffs.  In the general economic 
stimulus package the GOJ also announced April 10 (ref), the 
government included two further aviation-related elements: 
extension of Haneda Airport's "C" runway and assistance for 
the regional airline network.  (Note:  The latter is repeated 
in the MLIT support package.  End note.) 
 
¶3.  (SBU) The MLIT support package envisions four major 
pillars:  measures to increase profitability; to reduce 
costs; to maintain the air transport network; and to respond 
to airlines' demand for credit.  (Note:  Post forwarded 
separately a translation of the package's text April 17 to 
EEB/TRA.  End note.)  Asked whether foreign airlines are 
eligible for MLIT support, Orihara said it would be more 
appropriate for such airlines to seek assistance from their 
own governments, as U.S. airlines did in the wake of 
September 11. 
 
Increase Profitability 
---------------------- 
 
¶4.  (SBU) One element of the measures is that MLIT will 
allocate at Haneda Airport two domestic flights per day to 
Japanese carriers that previously were reserved for 
government and press aircraft.  Japan Airlines (JAL) and All 
Nippon Airways (ANA) will operate one flight each.  Orihara 
explained the newly-allocated flights cannot be used for 
international routes, which require reciprocal rights for the 
other country to be determined through bilateral 
negotiations.  In the interest of time, and because it would 
be difficult or impossible to decide which country's airlines 
should benefit from the flights, MLIT decided to allocate 
these flights domestically, he continued. 
 
¶5.  (SBU) The MLIT also identifies several measures to 
"increase aviation demand," including a focus on bilateral 
aviation negotiations and on tourism promotion.  The Ministry 
plans as well to abolish price floors (but not price 
 
TOKYO 00001021  002 OF 003 
 
 
ceilings) for first and business class fares. 
 
Reduce Costs 
------------ 
 
¶6.  (SBU) The MLIT will suspend temporarily the 
"use-it-or-lost-it" rule on airport slots for flights to 
Thailand and India.  It is looking as well for ways to reduce 
fuel costs through updated air traffic control and management 
methods.  As noted in the MLIT support package, the 
U.S.-Japan Bilateral Aviation Safety Agreement (BASA), signed 
April 27, also reduces costs for aircraft design, 
certification and maintenance. 
 
Air Transport Network 
--------------------- 
 
¶7.  (SBU) Efforts to maintain the air transport network focus 
on maintaining flights to regional airports.  To respond to 
the drop in aviation demand, MLIT has lowered landing fees at 
domestic airports managed by the central government.  (Note: 
Orihara showed econoffs a chart identifying landing fee 
reductions ranging from 10 percent for airports with frequent 
flights up to 50 percent for airports with fewer flights. 
End note.)  Asked about reductions at international airports, 
Orihara said the GOJ cannot direct a private company such as 
the Narita Airport Corporation to "reduce its profit" by 
lowering landing fees.  Landing fee reductions (e.g., support 
for unprofitable routes) have existed for some time, Orihara 
noted, and in the fiscal year ending March 2010, MLIT will 
consider further reductions at a rate yet to be determined. 
 
Airlines Demand Credit 
---------------------- 
 
¶8.  (SBU) The MLIT intends to request relevant financial 
organizations to consider appropriate measures, in accordance 
with their own financial risk assessment procedures, to 
respond to the demand for credit.  Orihara explained that in 
response to individual applications from Japanese airlines, 
which will not be released publicly, MLIT will urge relevant 
financial organizations to provide credit to airlines.  This 
measure does not include any GOJ funding.  All Nippon Airways 
(ANA) continues to insist it has not requested any government 
support, but according to media reports, Japan Airlines (JAL) 
will consider seeking a two billion dollar loan. 
 
Reaction from U.S. Airlines 
--------------------------- 
 
¶9.  (SBU) The most recent MLIT measures are "more of the 
same," one U.S. airline executive told econoffs April 27.  He 
is disappointed, but not surprised, the landing fee 
reductions will not be applied generally to all airports, 
i.e., to include Narita.  (Note:  When speculation arose in 
February that MLIT planned to announce support measures for 
airlines, U.S. air carriers considered lobbying MLIT to 
ensure such measures did not disadvantage foreign carriers. 
However, industry decided not to press MLIT on this matter 
but rather devoted its energies to resolving negotiations to 
reduce landing fees at Narita.  According to one U.S. airline 
executive, lower landing fees at Narita -- a topic included 
in the U.S.-Japan Regulatory Reform Initiative discussions -- 
would have a much more significant effect on business than 
the new MLIT support package.  End note.) 
 
Comment 
 
TOKYO 00001021  003 OF 003 
 
 
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¶10.  (SBU) The MLIT clearly wants to appear to be doing 
something to address the declining fortunes of the Japanese 
airline industry.  However, its newly announced package 
largely rehashes existing programs.  The primary beneficiary 
of MLIT's assistance package makeover is likely JAL, which 
will gain an advantage from the new "use-it-or-lose-it" rule 
suspension on select flights.  JAL is also the only Japanese 
airline reportedly considering loan assistance.  Doing away 
with price floors on first and business class fares arguably 
is a small step in the direction of market-based principles 
for Japan's civil aviation sector.  However, taken as a 
whole, MLIT's package looks like more of the same, i.e., prop 
up the domestic industry by offering support measures for 
unprofitable routes. 
ZUMWALT