News / Asia

Japan Politics Loom Over ANA Choice Between Airbus, Boeing

FILE - People work under an All Nippon Airways' (ANA) Boeing Co's 787 Dreamliner aircraft at ANA's maintenance center.
FILE - People work under an All Nippon Airways' (ANA) Boeing Co's 787 Dreamliner aircraft at ANA's maintenance center.
Reuters
When Japan Airlines broke with decades of tradition by buying long-haul jets from Europe's Airbus, rather than U.S. rival Boeing, it informed the Japanese government by email without any prior warning.
 
The deal, worth $9.5 billion at list prices, was a major blow for Boeing, which holds more than 80 percent of Japan's commercial aviation market and has been intertwined with U.S-Japan diplomatic relations since shortly after WWII.
 
However, the way JAL communicated the decision - with a curt message delivered to officials' inboxes just as it was publicly announcing the deal, according to Japanese government sources and a person close to the airline - was just as momentous.
 
For weeks the deal, initially a draft document, had been the most closely held secret in the aerospace business. Now, JAL's decision to focus on cold business logic revealed a new distance between the national flag carrier and the Tokyo government.
 
It also sharpens the political implications of the choice facing rival ANA, which in coming months is to make a similar decision on replacing its aging Boeing long-haul fleet with more fuel-efficient planes.
 
JAL's Oct. 7 order for 31 wide-body A350 jets was a coup for Airbus, which had never directly sold a jet to the airline.
 
Analysts say the chances have increased that All Nippon Airways will buy around 30 A350s, Airbus's first mostly carbon-composite jetliner, in preference to Boeing's 777X, for the same business reasons that JAL did. ANA's decision is expected by early 2014.
 
However, shifting political allegiances following JAL's bankruptcy three years ago, which brought a change in company leadership, have meant that the flag carrier is no longer under the same government sway that has guided major aerospace decisions throughout the postwar period, say people close to both airlines. ANA, by contrast, is now close to the ruling party, and may come under greater pressure to buy Boeing.
 
The head of a prominent leasing company with links to both planemakers told Reuters ANA would probably select the 777X.
 
The diplomatic picture is complicated by Japan's talks on a free trade deal with the European Union, which Airbus executives believe could exert a countervailing influence in its favor.
 
Hands-off Approach
 
The government says it is completely hands-off - as World Trade Organization rules demand. However, sources with both planemakers accuse the other of wheeling out diplomatic support.
 
JAL's choice of Airbus “was a private decision made by a private company, and the government has absolutely no connection to it,” Chief Cabinet Secretary Yoshihide Suga said on Tuesday.
 
“The various airline companies make their decisions on what to buy based on their own management situations.”
 
For decades JAL saw itself as Japan's elite airline, what one person with many years' experience in U.S.-Japan business and governmental affairs called “an appendage of the Japanese government”.
 
ANA was the also-ran, a one-time helicopter service operator that only made its push into international flights in the 1980s.
 
Boeing dominates the Japanese market partly because of the close U.S.-Japan security and diplomatic alliance.
 
It also shares the building work widely in Japan, with companies such as Mitsubishi and Kawasaki making as much of the 787 Dreamliner airframe as Boeing itself does.
 
A Boeing spokesman said in an emailed statement that the company spent nearly $4 billion on goods and services in Japan in 2012, accounting for around 22,000 jobs or more than 40 percent of the country's aerospace workforce.
 
“Boeing and Japan are one,” the then-president of Boeing Japan told U.S. officials in 2008 while the company was lobbying successfully for ANA to buy its jets, according to an embassy cable to Washington published by Wikileaks.
 
In the past, “there was pressure by government at the highest levels to buy Boeing”, said the U.S.-Japan source.
 
That relationship changed during the long-ruling Liberal Democratic Party's rare spell in opposition between 2009 and 2012. ANA continued assiduously to court LDP lawmakers, who felt abandoned by JAL executives, people familiar with the process say.
 
In 2010 JAL collapsed into bankruptcy and was put through a $3.5 billion taxpayer rescue by the Democratic Party of Japan, which brought with it a new CEO, appointed by the government.
 
When Prime Minister Shinzo Abe led the LDP back into power last December, regaining the role the party has held for almost all of the past 60 years, JAL was now seen as the airline of the opposition and ANA enjoyed official favor.
 
ANA denied it was coming under political pressure to buy Boeing. “There is nothing of the sort,” a spokesman for the company said.
 
Landing Slots
 
An illustration of that political shift came at the start of this month, when Abe's government granted ANA more than twice as many new landing slots at Tokyo's Haneda airport as it gave JAL.
 
The government said the unprecedented skew was to redress the competitive advantage JAL had gained from the rescue, which saw creditors forgive 730 billion yen ($7.4 billion) in debt.
 
Landing slots at the capital's Haneda and Narita airports, which can each mean $20 million a year in operating profit for an airline, had previously always been split evenly.
 
JAL, which earned an operating profit of 20 billion yen for the three months to June, has appealed against the awarding of more slots to ANA, which lost 5.6 billion yen during the period.
 
The decision, traditionally handled by the Civil Aviation Bureau, was this time taken over by the Prime Minister's Office, where top executives of both airlines went personally to lobby, according to people familiar with the process.
 
“It was the wish of the LDP to punish JAL, and ANA leveraged that,” said a person close to JAL.
 
Dreamliner Nightmare          
 
The frostiness between the government and JAL meant it was not under pressure to buy Boeing, and the airline made its decision based on the merits, said a person close to JAL. People close to Airbus said the post-bankruptcy JAL is, as one of them put it, “more cost-conscious and business-oriented.”
 
JAL President Yoshiharu Ueki said delivery schedules played a big part, and a source close to the airline said it was “totally about timing. Boeing would have been too late.”
 
The Dreamliner debacle also loomed large.
 
JAL's Ueki said the decision to buy Airbus was not linked to the 3-1/2 years of delays of the Boeing 787 or the self-combusting batteries that grounded the global fleet in January.
 
However, a person close to Boeing said JAL's decision was “in some ways understandable given the hell we have put them through” with the Dreamliner.
 
ANA, the launch buyer and world's biggest owner of the 787, suffered millions of dollars of losses as a result. The airline will factor the risk of a delay in aircraft delivery into its purchase decision, CEO Shinichiro Ito told Reuters last month.
 
Boeing and Airbus are wooing ANA, people familiar with the process say, while the airline says it is seeking more information from the makers.
 
After the JAL setback, ANA is fast becoming a “can't lose at any cost” deal for Boeing, according to an industry source close to the U.S. planemaker.
 
However, Tokyo's interests are not unequivocally aligned with Washington's anymore said a person close to Airbus.
 
The Japanese government is “very eager” to complete a free-trade agreement with the European Union, especially as rival South Korea has already sealed such a pact, he said.
 
For years, the E.U., which has a formal trade dispute with Japan, has contended that the practice of favoring Boeing over Airbus amounts to a non-tariff trade barrier. Tokyo is keen to prove otherwise, the source said.
 
“The political environment was favorable because of the discussions to establish a free trade agreement between Japan and the E.U.,” Airbus Chief Executive Fabrice Bregier said of the successful campaign to win over JAL.
 
“(It) meant the environment would support this kind of partnership or at least would not prevent it,” he told Reuters.
 
The breakthrough followed years of smaller deals and patient lobbying which intensified following a reorganization of the Japanese activities of Airbus parent EADS and the arrival in 2010 of a new salesman, contracts expert Jean-Pierre Stainnack.
 
For years, the Airbus sales job in Japan was seen as one of the toughest in the industry.
 
Airbus had struggled to get a foot in the door to present to departments that can create a groundswell inside an airline in favor of one manufacturer, such as maintenance teams, but JAL's restructuring and new CEO appeared to change all that.
 
“We used marketing 101. We started small, put in initial aircraft and worked through lessors for many years,” Stainnack said of the European company's conquest of Japan. “For JAL, we went in with a clear notion of the market and didn't want any political interference. The airline would have said the same.”

You May Like

Photogallery US to Send 3,000 Troops to Liberia in Expanded Ebola Effort

At US Centers for Disease Control and Prevention in Atlanta, Obama is to announce troop deployment, other details of US plans to fight Ebola outbreak More

China Muslims Work to Change Perceptions After Knife Attacks

Muslims in Kunming say that they condemn the violence, it is not a reflection of the true beliefs of their faith More

Humanitarian Aid, Equipment Blocked in Cameroon

Move is seen as a developing supply crisis in West Africa More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Enviropreneur Seeks to Save the Environment, Empower the Communityi
X
September 16, 2014 2:06 PM
Lorna Rutto, a former banker, is now an ‘enviropreneur’ - turning plastic waste into furniture and fences discusses the challenges she faces in Africa with raw materials and the environment.
Video

Video Enviropreneur Seeks to Save the Environment, Empower the Community

Lorna Rutto, a former banker, is now an ‘enviropreneur’ - turning plastic waste into furniture and fences discusses the challenges she faces in Africa with raw materials and the environment.
Video

Video West Trades Accusations Over Ransoms

As world leaders try to forge a common response to the threat posed by Islamic State militants in Iraq and Syria, there is simmering tension over differing policies on paying ransoms. In the past month, the jihadist group has beheaded two Americans and one Briton. Both countries refuse to pay ransom money. As Henry Ridgwell reports for VOA from London, there is uncertainty in the approach of some other European nations.
Video

Video Scotland Independence Bid Stokes Global Interest

The people of Scotland are preparing to vote on whether to become independent and break away from the rest of Britain, in a referendum being watched carefully in many other countries. Some see it as a risky experiment; while others hope a successful vote for independence might energize their own separatist demands. Foreign immigrants to Scotland have a front row seat for the vote. VOA’s Henry Ridgwell spoke to some of them in Edinburgh.
Video

Video Washington DC Mural Artists Help Beautify City

Like many cities, Washington has a graffiti problem. Buildings and homes, especially in low-income neighborhoods, are often targets of illegal artwork. But as we hear from VOA’s Julie Taboh, officials in the nation's capital have come up with an innovative program that uses the talents of local artists to beautify the city.
Video

Video US Muslim Leaders Condemn Islamic State

Leaders of America's Muslim community are condemning the violent extremism of the Islamic State group in Iraq and Syria. The U.S. Muslim leaders say militants are exploiting their faith in a failed effort to justify violent extremism. VOA correspondent Meredith Buel reports.
Video

Video Americans' Reaction Mixed on Obama Strategy for Islamic State Militants

President Barack Obama’s televised speech on how the United States plans to “degrade and destroy” the group known as the Islamic State reached a prime-time audience of millions. And it came as Americans appear more willing to embrace a bolder, tougher approach to foreign policy. VOA producer Katherine Gypson and reporter Jeff Seldin have this report from Washington.
Video

Video Authorities Allege LA Fashion Industry-Cartel Ties

U.S. officials say they have broken up crime rings that funneled tens of millions of dollars from Mexican drug cartels through fashion businesses in Los Angeles. Mike O'Sullivan reports that authorities announced nine arrests, as 1,000 law enforcement agents fanned out through the city on Wednesday.
Video

Video Bedouin Woman Runs Successful Business in Palestinian City

A Bedouin woman is breaking social taboos by running a successful vacation resort in the Palestinian town of Jericho. Bedouins are a sub-group of Arabs known for their semi-nomadic lifestyle. Zlatica Hoke says the resort in the West Bank's Jordan Valley is a model of success for women in the region.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid