FOR IMMEDIATE RELEASE
Friday, January 30, 1998
Contact: Bill Mosley
Tel.: (202) 366-5571
DOT 18-98
UNITED STATES, JAPAN REACH
AVIATION AGREEMENT
THAT PROVIDES IMMEDIATE BENEFITS, SETS STAGE
FOR FURTHER LIBERALIZATION
The United States and Japan today
reached an aviation agreement that provides substantial,
immediate
benefits for the airlines of both countries while setting the
stage for further liberalization in the future,
Secretary of Transportation Rodney E. Slater announced.
The accord, reached after 11 days of talks in Washington, represents a critical step in President Clinton’s successful liberalization of aviation service in the Asian-Pacific Region.
"This is a dramatic step forward for airlines, consumers and cities in both countries," Secretary Slater said. "The billions of dollars in economic benefits of this agreement will be seen in more convenient service to more cities and the expansion of local economies benefitting from increased trade, investment and tourism. The Asia-Pacific region accounts for over one-third of the world’s international passenger traffic, and this agreement will continue to provide our carriers, passengers and businesses critical access to that region."
Secretary Slater noted that while the new agreement liberalizes U.S.-Japan services immediately, additional benefits will take effect automatically after four years if a fully liberalized agreement is not in place by that time.
The U.S. government estimates that as a result of the agreement, U.S. passengers will enjoy gains of $1.2 billion over four years, measuring the value of additional service in a more competitive market. U.S. carriers will enjoy additional revenue of just over $4 billion over four years due in part to an increase in U.S.-carrier market share. In addition, U.S. exports of aviation services will enjoy a net increase of almost $4 billion over the four-year period.
The agreement will remove all restrictions on the U.S.-Japan services of the so-called "incumbent" carriers -- currently United Airlines, Northwest Airlines and Federal Express -- who will be able to operate from any U.S. gateway point to any point in Japan. These carriers also will be able to fly beyond Japan to third countries without limitation on the number of flights. Incumbent carriers are those whose rights stem from the original 1952 U.S.-Japan civil aviation agreement.
In addition, U.S. carriers that serve Japan other than the incumbents will gain substantial new opportunities. American Airlines, Delta Air Lines and Continental Airlines, which currently operate only 46 weekly round-trip flights between the two countries, will be able to add 90 additional round-trip flights, increasing their access by nearly 200 percent. The agreement also allows the United States to designate two additional passenger carriers to serve Japan, one immediately and another in two years.
Non-incumbent all-cargo carriers gain new rights in addition to those secured in the 1996 U.S.-Japan all-cargo agreement. Polar Air Cargo and United Parcel Service will enjoy new operating flexibility, creating valuable opportunities to transport cargo to destinations beyond Japan. In four years, an additional U.S. all-cargo company will be allowed to open service to Japan and to a point beyond Japan.
Under the new agreement, code sharing for U.S.-Japan services will be permitted for the first time. Code sharing, a marketing arrangement whereby one airline puts its code on the flight of another airline, has become an increasingly important way for carriers to provide seamless service to passengers. Under the agreement, code sharing may be conducted between U.S. and Japanese carriers, among U.S. carriers, or among some combination of U.S., Japanese and third-country carriers.
The new agreement also will allow each side to select additional points in Japan for service to Guam and Saipan, which are among the most popular destinations for Japanese tourists.
The Japanese carrier All Nippon Airways gained unrestricted access to points in the United States. Previously, Japan Air Lines was the only Japanese carrier that enjoyed this right.
If a fully liberalized agreement is not reached within four years, additional liberalizing benefits will take place automatically. These include up to 35 additional weekly round-trip flights for non-incumbent carriers.
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HIGHLIGHTS OF UNITED STATES - JAPAN CIVIL AVIATION AGREEMENT
This agreement open doors for non-incumbent carriers.
- Non-incumbent "combination" carriers, currently Delta, American and Continental, gain the right to offer an additional 90 weekly round-trip flights between the U.S. and Japan, nearly tripling their access to this market. (Combination carriers carry both passengers and cargo.)
- Two new non-incumbent combination carriers will be able to enter the U.S.-Japan market, one immediately and another in two years.
- Non-incumbent all-cargo carriers, UPS and Polar Air Cargo, gain valuable new opportunities to transport cargo to destinations beyond Japan. An additional all-cargo carrier will be able to enter the market in four years.
This agreement eliminates restrictions and resolves disputes for incumbent carriers.
- This agreement lifts all restrictions on the number of flights operated and points served between the U.S. and Japan by incumbent combination and all-cargo carriers (United Airlines, Northwest Airlines and Federal Express).
- This agreement resolves the long-standing dispute over our incumbent carriers’ rights to fly from Japan to other international points beyond Japan.
Code sharing is permitted for the first time. U.S. and Japanese carriers can code freely, U.S. carriers can code share among themselves on many operations to Japan and beyond, and U.S. carriers can code share with third-country carriers on operations to and beyond Japan.
Other new services will be available. Charter operations will increase in two years from the current 400 flights per year to 600 flights per year rising eventually to 800 flights.
Distribution and pricing provisions will promote competition. U.S. carriers are guaranteed a fair and equal opportunity to contract with wholesalers and travel agents and to set up enterprises to market their services directly to consumers. We have agreed to meet by May 1998 to consider further steps to liberalize pricing.
Liberalization will continue to move forward. We will begin talks within three years regarding a fully liberalized agreement. If we do not reach that goal by 2002, supplemental rights will be available. For example, non-incumbent combination carriers will gain the right to operate up to 35 additional weekly round-trip flights between U.S. and Japan.
Economic benefits will be substantial. Based on calculations of the President’s Council of Economic Advisors, we estimate that this agreement will provide the following cumulative benefits over four years: U.S. passengers will enjoy gains of about $1.2 billion (measuring the value to U.S. passengers of more service in a more competitive market); U.S. carriers will enjoy additional revenue of just over $4 billion (due, in part, to an increase in their market share); and U.S. exports of aviation services will enjoy a net increase of almost $4 billion (in each year, the U.S. trade surplus in this sector will be $1 billion higher than it otherwise would be).