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.
TEXT SIZE - +
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

Analysts Warn of Regional Proxy Conflict in Afghanistan

Analysts warn if Kabul’s neighbors do not start to cooperate, competing desires for influence could deteriorate into a bloody proxy war in the country More

Saudi Intelligence Chief Replaced

Bandar bin Sultan came under criticism for supporting al Qaida, prompting King Abdallah to wrest Syria operations away from him in February, handing them to Interior Minister Prince Mohammed bin Nayef More

Poetry Magazine editor Don Share talks what makes a good poem with VOA's David Byrd

What makes a good poem? And is poetry as viable an art form as it once was? To find out, VOA's David Byrd spoke to Don Share, the editor of Poetry Magazine. More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Google Buys Drone Companyi
|| 0:00:00
...
 
🔇
X
George Putic
April 15, 2014
In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
Video

Video Google Buys Drone Company

In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
Video

Video Ray Bonneville Sings the Blues and More on New CD

Singer/songwriter Ray Bonneville has released a new CD called “Easy Gone” with music that reflects his musical and personal journey from French-speaking Canada to his current home in Austin,Texas. The eclectic artist’s fan base extends from Texas to various parts of North America and Europe. VOA’s Greg Flakus reports from Austin.
Video

Video Millions Labor in Pakistan's Informal Economy

The World Bank says that in Pakistan, roughly 70 percent work in the so-called informal sector, a part of the economy that is unregulated and untaxed. VOA's Sharon Behn reports from Islamabad on how the informal sector impact's the Pakistani economy.
Video

Video Passover Celebrates Liberation from Bondage

Jewish people around the world are celebrating Passover, a commemoration of their liberation from slavery in Egypt more than 3,300 years ago. According to scripture, God helped the Jews, led by Moses, escape bondage in Egypt and cross the Red Sea into the desert. Zlatica Hoke reports that the story of the Jewish Exodus resonates with other people trying to escape slave-like conditions.
Video

Video Police Pursue Hate Crime Charges Against Kansas Shooting Suspect

Prosecutors are sifting through the evidence in the wake of Sunday’s shootings in a suburb of Kansas City, Missouri that left three people dead. A suspect in the shootings taken into custody is a white supremacist. As VOA’s Kane Farabaugh reports, he was well-known to law enforcement agencies and human rights groups alike.
Video

Video In Eastern Ukraine, Pro-unity Activists Emerge from Shadows

Amid the pro-Russian uprisings in eastern Ukraine, there is a large body of activists who support Ukrainian unity and reject Russian intervention. Their activities have remained largely underground, but they are preparing to take on their pro-Moscow opponents, as Henry Ridgwell reports from the eastern city of Donetsk.
Video

Video Basket Maker’s Skills Have World Reach

A prestigious craft show in the U.S. capital offers one-of-a-kind creations by more than 120 artists working in a variety of media. As VOA’s Julie Taboh reports from Washington, one artist lucky enough to be selected says sharing her skills with women overseas is just as significant.
Video

Video UN Report Urges Speedier Action to Avoid Climate Disaster

A new United Nations report says the world must switch from fossil fuels to cleaner energy sources to control the effects of climate change. The Intergovernmental Panel on Climate Change released the report (Sunday) following a meeting of scientists and government representatives in Berlin. The comprehensive review follows two recent IPCC reports that detail the certainty of climate change, its impacts and in this most recent report what to do about it. VOA’s Rosanne Skirble has the details.
AppleAndroid