Tokyo Report: ANA Jittery over JAL Revival Plan

Tokyo, April 19 (Jiji Press)--Concern is growing stronger at All
Nippon Airways <9202> over the rehabilitation process of failed archrival
Japan Airlines led by state-backed Enterprise Turnaround Initiative Corp. of
Japan.
With JAL expected to receive huge public funds of 300 billion yen
in capital if its revival plan is authorized under the Corporate
Rehabilitation Law, possibly this summer, ANA has repeatedly warned that a
new fare-cutting offensive by its main competitor threatens fair
competition.
ANA began issuing such warnings when JAL announced on Jan. 22 after
filing for bankruptcy protection that it would revive its "Birthday
Discount" service from April to September after a hiatus of two years.
The reservation program cuts domestic flight fares by up to 74 pct
for passengers flying JAL around their birthdays. JAL President Masaru
Onishi says the aim is to stimulate interest in flight services rather than
eating into the "market pie."
But an ANA executive described the program as a "bargain sale"
using taxpayer money in disregard of market forces.
In an apparent bid to preempt the program, ANA introduced a
discount service at the end of January to cut fares by up to 73 pct for
passengers making reservations 45 days in advance.
The Birthday Discount service could hinder JAL's rehabilitation by
reducing profit, although it will help the carrier to improve its
operational rate and market share, an expert says.
As the aviation industry remains in the doldrums amid the prolonged
recession, JAL and ANA could both collapse if they engage in excessive
price-cutting competition, according to experts.
The transport ministry therefore warned JAL in writing in early
February that using public financial support to carry out "reckless" fare
cuts could hamper fair competition.
The unusual warning promoted JAL to pledge that it would not resort
to unnecessary fare reductions, and the two carriers have so far avoided
outright price-cutting competition.
In March, however, ANA President Shinichiro Ito warned that the use
of public funds to finance renewal of JAL's aircraft and computer systems
will not ensure fair competition.
Stressing that public funds should be used only to maintain JAL
routes needed for public transportation and to sort out its liabilities, Ito
said there should be detailed disclosure of how taxpayer money is used.
JAL officials complain that ANA is demanding too much, noting that
JAL cannot proceed with business reconstruction without renewing its
aircraft through the use of public funds.
But a brokerage house analyst points out that the Japanese aviation
industry is dominated by JAL and ANA, so any benefits for one will
disadvantage the other.
While JAL's rehabilitation plans are still unclear, therefore, it
is "understandable" for ANA to be "nervous", says an official at a major
financial institution.


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