industry for Japanese and American consumers, U.S. and Japanese
representatives began talks this past Monday to develop an "open
skies" agreement that will lower government regulation and increase
convenience for international travelers.
Discussions are well underway however strong competition between two
U.S. carriers Delta and American Airlines are threatening to
overshadow the true aim of the agreement due to their fighting over
who would partner with Japan Airlines.
Currently American has a partnership with JAL and if an open sky
policy were implemented it would be a considerably lucrative deal that
would yield much higher profit margins for both JAL and whichever
domestic U.S. airline they choose to partner with. As Delta and
American battle it out, a few more issues are also preventing the
talks from moving forward at a swift pace.
While U.S. carriers bicker and bargain, Japan has their own interests
in mind, and are using antitrust immunity as a dealbreaker with U.S.
negotiators. The antitrust immunity would not only apply to JAL but to
their partner airline as well, and would prevent any sort of
regulation regardless of the amount of market share the air
partnership gains. Another Japanese airline, All Nippon, is seeking
this immunity in addition to JAL, for their own partnership with U.S.
carrier Continental.
Deputy assistant Secretary of State John Byerly stated that the U.S.
can not technically grant antitrust immunity in exchange for a trade
treaty, but apparently an application for said exception exists. The
State Department has stepped out of the picture, allowing the Trade
Department final word on both JAL's and All Nippon's immunity
applications.
American Airlines has maintained a fifteen year relationship with JAL
and are pouring an incredible amount of money into lobbying with the
Trade Department in addition to bribing Japan Airline in order to
influence the outcome of their decision on the immunity applications.
In an effort to prevent JAL from switching partners to Delta, AA has
taken both a positive and negative approach. They're highest offer so
far is 1.8 billion dollars in investments for JAL and meanwhile they
are essentially threatening denied immunity if a switch of partners is
made as they dote lobbying funds onto government officials. Delta has
likewise offered upward of a billion dollars to JAL to maintain
competitiveness and will likely increase their offer as the talks
continue.
Delta Airlines, following their acquisition of Northwest, operates
more flights between the U.S. and Japan and if partnered in an
antitrust-immune agreement would possess a 62% market-share in the
U.S.-Japan air industry. American argues that this violates the very
point of the agreement, which is to create more competition, not strip
it away. Ironically, American Airlines spokespersons have not
acknowledged the anti competitiveness of an antitrust immunity.
Needless to say, an agreement won't be reached anytime soon, and
policy will not be implemented for quite a while. Three issues are
preventing quick and easy "open skies" agreements including mad
lobbying, government regulation and monopoly controversy. Ideally, it
is best for society if Japan and U.S. come to an agreement to increase
air transportation and lower prices, this can go without saying. If it
weren't for insane bureaucracies and regulation, the process of
implementing such desirable policy would be much easier. Talks between
the U.S. and Japan will likely continue as Delta and American work to woo
the near bankrupt Japan Airlines. The inefficiency of the high transaction
costs these negotiations are creating could potentially offset increased efficiency
in the market, and potentially could eliminate an agreement being reached at all.
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