US, Japan Forge Open Skies Agreement

By: David Koenig and Harry R. Weber, AP Airlines Writers
By: David Koenig and Harry R. Weber, AP Airlines Writers

The U.S. and Japan reached a landmark agreement Friday to relax limits on flights between the two countries, opening up the possibility of broader cross-border airline alliances and more options for air travelers.

Under the agreement, which still must be finalized by both governments, airlines from both countries would be allowed to select routes and destinations based on consumer demand for both passenger and cargo services without limitations on the number of U.S. or Japanese carriers that can fly between the two countries or the number of flights they can operate.

The agreement also would remove restrictions on capacity and pricing, and provide unlimited opportunities for cooperative marketing arrangements between U.S. and Japanese carriers.

Delta and United Airlines are already allowed to serve Japanese cities, and Delta's acquisition of Northwest Airlines last year increased its Asian presence. But U.S. passenger airlines have been generally limited in the routes and number of flights they can operate to Japan.

United CEO Glenn Tilton said his airline soon would file an antitrust immunity application for a trans-Pacific joint venture with All Nippon Airways and Continental Airlines. The U.S.-Japan agreement likely will also prompt Japan Airlines to seek a joint venture with a U.S. carrier.

The U.S.-Japan agreement also would provide opportunities for growth of U.S. carrier operations at Narita Airport near Tokyo and ensure fair competition regarding the new opportunities at Tokyo's Haneda Airport, which is close to the city center, according to a statement from the U.S. Department of Transportation.

American Airlines currently has a codesharing agreement with Japan Airlines, while United Airlines has a codesharing agreement with All Nippon Airways. Delta Air Lines is seeking to lure Japan Airlines away from American and into Delta's SkyTeam alliance.

A joint venture allows airlines to share cost and revenue on certain flights regardless of which airline owns or flies the aircraft. It differs from a simple codesharing agreement in which one airline bears all the cost but another airline might get a share of the revenue for booking a customer on a flight.

The DOT said the text of the so-called "open skies" agreement between the U.S. and Japan has been set, although there is no specific timetable on when the agreement will take effect.

The U.S. has open skies agreements with other countries, including the European Union and Australia.

Tilton said a joint venture with All Nippon Airways and Continental would strengthen his airline's Pacific network and give passengers access to more seats and cargo capacity.

Continental, based in Houston, said one key part of the open skies agreement is that it provides the U.S. airline industry guaranteed access to Haneda airport for the first time. That could spur sales on U.S. carriers flying to Japan because of how close the airport is to the center of Tokyo.

Atlanta-based Delta said in a statement it has long supported open skies in international markets.

"This agreement opens the door to antitrust immunity, which would enable Delta and Japan Air Lines to engage in deeper and more effective cooperation, producing greater benefits for the carriers and their customers," spokesman Trebor Banstetter said.

Delta and its SkyTeam partners have offered $1 billion to lure JAL away from American. In turn, American has offered to lead a $1.1 billion investment in struggling JAL to prevent it from falling into Delta's orbit.

It wasn't immediately clear if the open skies agreement between the U.S. and Japan would lead to higher or lower ticket prices for consumers traveling between the two countries.

American praised the agreement, saying it would replace a system under which some carriers get better access to markets than others. Open skies agreements "end discriminatory aviation policies and are in the best interest of American and Japanese people as well as the nations' airlines," said Will Ris, an American vice president.

American is a unit of AMR Corp., based in Fort Worth, Texas. United is a unit of UAL Corp., based in Chicago.


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