It is a simple question, but one that has been asked over and over by Washington aviation officials since the chairman and chief executive of United Airlines delivered a vitriolic, anti-Japan speech to the Economic Club of Detroit in late September: 'What was Gerald Greenwald thinking?'
Greenwald, once the heir-apparent to Lee Iacoca at Chrysler Corp, was on familiar Michigan soil as he delved into a series of lowest common denominator accusations and statements about Japan designed to engender furrowed-brow agreement from an audience composed primarily of automotive manufacturing executives.
Showing a rhetorical grandiosity whose antecedents were a mix of Winston Churchill and Ronald Reagan, Greenwald brought forth the spectre of a 'bamboo curtain between East and West' as he intoned military history by speaking grimly of Japan's nefarious plans 'to establish a kind of colonial monopoly' within Asia by limiting US carrier [read: United Airlines] fifth freedom rights beyond Japan. 'No doubt,' he added, 'there will be some who will characterise my remarks on the beyond rights as Japan bashing.'
He certainly got that right. Aviation officials in Washington believe the comments were unnecessarily harsh, bordering on jingoistic. 'It was shocking,' says one source close to Japan Airlines. A US government official says: 'Given the importance of Japan to United, it was remarkable to see [him] lash out.' A government affairs vice president with a US carrier adds: 'It is one thing objectively and dispassionately to discuss elements of a trade policy that are harmful, but it is another thing to personalise it in terms of culture. You can say this is part of a strategy, but it is hard to see anything good here.'
The only strategy that a United spokesman is prepared to indicate is the continuing issue of United's application to serve Seoul from Osaka, which has been lost in the wake of FedEx's major lobbying coup in having its own beyond rights from Osaka approved last July.
But many agree that it takes more than a beyond service for Greenwald and company to risk insulting Japanese government officials. In reality, this is a thinly veiled attempt to pressure US transport officials into not limiting US beyond rights from Japan in order to benefit third- and fourth-freedom services between the two countries, as carriers like American Airlines desperately want. 'They want to protect their franchise,' says a US official.
In the name of protecting that Asian franchise, which makes up a sizeable proportion of United parent UAL Corp's annual revenue, Greenwald's sentiments were echoed on the same day in speeches by UAL executive vice president and general counsel Stuart Oran in Washington and by vice president of international affairs Cyril Murphy in Australia. As well as lambasting Japan, they were heralding a UAL-sponsored report by Booz Allen which concludes that the fifth-freedom rights beyond Japan, enshrined in the 1952 Japan-US bilateral, are a US national economic treasure to be protected. United officials say Japan is ready to take its beyond rights away in an act of 'economic imperialism.'
The language makes US officials wince, not only because it is heavy handed, but because there is an element of subterfuge to it. Contrary to United's opinion, no one has yet spoken of ratcheting back existing rights. What has been put forward is a limit to fifth freedom growth (by Northwest Airlines as well as United) to placate American, which is lobbying hard to get more rights to Japan. American objects strongly to the Booz Allen findings, and says that the problem is not Japan, but the US Department of Transportation's dependence on external economic analyses.
Washington insiders say that United's new take-no-prisoners front has all the markings of Cyril Murphy, who under former UAL chairman Stephen Wolf was a 'more diplomatic force', according to a US official. Another change since Wolf's departure is United's unwillingness to give up unused fifth freedom authority from Japan - say, to Europe. A few years ago, that would be offered as a bargaining chip to get more third and fourth freedom access to Japan. 'Now they are holding on to all the fifths,' says a government source.
Part of the United approach comes from the fact that cargo, a traditional bargaining chip when the US renegotiates its bilateral with other countries, is being negotiated separately from passenger rights for the first time, thanks to FedEx. Greenwald is concerned that the US may have no other leverage than to offer giving up some fifth freedom rights.
All this activity presupposes that there is actually something happening between the US and Japan and that the bilateral will soon be renegotiated. Although in a stalemate after one round, the cargo negotiation is giving rise to hopes that a renegotiation of the passenger side of the bilateral is in the offing. Many aviation officials are beginning to believe that successful cargo liberalisation talks, along with heavy pressure from American, Delta Air Lines and All Nippon Airways (the latter two are pushing a codesharing alliance), could mean a passenger service rights renegotiation in 1996.
This, of course, is what worries United officials. However unfortunate the Japan bashing was, it serves the company's purpose of either forcing US negotiators to reject limits on fifth freedoms, or scuttling the negotiation before it starts.
Greenwald appears to believe that the rhetoric will have little effect except to position United better in any US-Japan negotiation. He may be right. But so may the international affairs official from a competing carrier: 'Japan won't forget what he said for 50 years.'
Source: Airline Business