Given the increasingly obvious premise that full open skies was not on the table, it eventually came down to the US Department of Transportation to judge at which point it was better to seal a deal than to prolong the agony of negotiations spanning two diametrically opposed cultures and 10 time zones.
With Northwest Airlines practically isolated in its stated belief that full open skies was possible, the rest of the industry is now examining whether the DOT's final cutoff point was wisely chosen.
Northwest now has to accept two realities. First, its campaign to hold out for full open skies was defeated. Second, Northwest can expect more competition in a market it has dominated for half a century. Many in Washington D.C. suspected that Northwest was as aware as all the other interested parties that open skies was not in sight and was using its stance as a ploy to maintain the status quo and avert fresh competition. But Northwest is sticking to its opinion that open skies was obtainable, particularly given the current Asian economic situation. 'Right now, the market is soft so there was every opportunity for holding out,' says Michael Levine, Northwest's executive vice president for marketing and international.
Given the done deal, Northwest is left to highlight those parts of it that are cause for optimism - chiefly that its fifth freedom rights from Japan are confirmed and it retains all of its weekly slots at Tokyo's Narita and Osaka's Kansai airports. Also, along with the other incumbent carriers, Northwest gains the right to fly between any point in the US and any point in Japan.
While the DOT expects the agreement to put 'some downward pressure' on air fares, Northwest is not outwardly concerned about this in the near term. 'We will have to wait and see what effect supply and demand have. There is no lack of supply right now,' says Levine.
Northwest is right to feel good about its slots. This is the issue that is most obviously left unaddressed by the agreement and which is likely to present the biggest hurdle to newcomers that hope to take advantage of a more liberalised regime (see Newsline). As Leo Mullin, chief executive officer at Delta Air Lines, puts it: 'We are reserving total enthusiasm for the deal until we get the slots situation totally buttoned up.'
However, signals from the DOT on the day of the announcement seemed to carry the message: 'Don't look here.' Non-incumbent carriers Delta, American Airlines and Continental Airlines, will be expected to find the slots they need at Narita through their own commercial transactions with other US carriers - chiefly FedEx - that own underused slots, at least until a new runway is constructed. At best, it seems, they will be left to haggle for slots that are put on the market. At worst, they may find those same slots are available only because of their undesirable timings.
Other US carriers have applauded the deal. United Airlines, as an incumbent, gains the freedom to operate from any point in the US to any city in Japan. The airline says it expects the agreement 'to open up opportunities to expand the scope and scale of the Star Alliance', since US carriers are now free to pursue codeshares with Japanese airlines. United is already in talks with new incumbent, All Nippon Airways, and says it also plans to increase capacity between Chicago and Tokyo by 130 per cent from 5 April.
If any single sector is truly happy with the deal, however, it is the cargo carriers. FedEx, as an incumbent, had campaigned long and hard to see the hotly-disputed issue of beyond rights nailed down. It can now operate freely beyond Japan. Non-incumbents Polar Air Cargo and UPS Airlines have also gained additional rights. 'The agreement is a milestone in trade relations,' says Polar's CEO Ned Wallace.
But will this particular milestone end up being, in fact, the finishing post? Many observers in Washington believe that, despite provisions designed to encourage the completion of a fully liberalised agreement within four years, what exists now will remain far beyond those four years. Which, of course, puts it safely beyond the concerns of the current administration. 'My sense now is that we have reached a status quo that might not change for a long, long time,' says one observer. 'I don't think Japan will ever be ready. I think they see a free ride from now on,' agrees another. It is difficult to see what leverage the US will bring to the table in future negotiations. While some contingency plans - including up to 35 additional weekly round-trip flights for non-incumbents - will activate automatically if full liberalisation does not occur, Japan now has what it most desired - incumbency for ANA.
That does not detract from the deal itself. DOT Secretary Rodney Slater says it was '. . . the very best deal we could get at this point in time.' This view is largely supported because the pact is, in essence if not reality, an open skies agreement. US negotiators Charles Hunnicutt, assistant secretary for aviation and international affairs at the DOT, and Alan Larson, assistant secretary for economic and business affairs at the Department of State, have been praised for their patience and ability to stay focused on core issues in this severe test of negotiating skills.
But the fact remains that the US has been seen to accept an open skies compromise. And it still has other tough negotiations ahead - not least with the UK and France who must be perusing the Japanese deal with interest. As one observer puts it: 'The US Government has sprained a shoulder patting itself on the back over open skies agreements, but the truth is that there is not an agreement out there that has not been done without consenting partners. Others might also be willing, but for a price.'
Karen Walker
Source: Airline Business
