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

Hostage Crisis Could Divide Japan Over Plans to Boost Military

Japanese Chief Cabinet Secretary Yoshihide Suga said Monday the government is working closely with the Jordanian government to secure the release of remaining Japanese hostage Kenji Goto More

Video Brussels Shaken as New Greek Leader Challenges Europe’s Austerity Drive

Country's youngest ever PM Alexis Tsipras, 40, sworn in Monday and says he will restore dignity to Greece by ending spending cuts More

Multimedia National Geographic Photo Camps Empower Youth

Annual mentoring program's mission is to give young people a voice to tell their own stories through photography More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Obama Urges Closer Economic Ties During Historic India Visiti
X
Aru Pande
January 26, 2015 9:33 PM
U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video Obama Urges Closer Economic Ties During Historic India Visit

U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video US, EU Threaten New Russia Sanctions Over Ukraine

U.S. President Barack Obama has blamed Russia for an attack by Ukrainian separatists that left dozens dead in the port of Mariupol and cast further doubt on the viability of last year’s cease-fire with the Kyiv government. VOA’s Michael Bowman reports from Washington.
Video

Video White House Grapples With Yemen Counterterrorism Strategy

Reports say the U.S. has carried out a drone strike on suspected militants in Yemen, the first after President Barack Obama offered reassurances the U.S. is continuing its counterterrorism operations in the country. The future of those operations has been in question following the collapse last week of Yemen’s government. VOA White House correspondent Luis Ramirez reports.
Video

Video Kerry Warns Against Violence in Nigeria Election

US Secretary of State John Kerry visited Nigeria Sunday in a show of the level of concern within the U.S. and the international community over next month’s presidential election. Chris Stein reports.
Video

Video Zoo Animals Show Their Artistic Sides

The pursuit of happiness is so important, America's founding fathers put it in the Declaration of Independence. Any zookeeper will tell you animals need enrichment, just like humans do. So painting, and even music, are part of the Smithsonian National Zoo's program to keep the animals happy. VOA’s June Soh met some animal artists at the zoo in Washington. Faith Lapidus narrates.
Video

Video Worldwide Photo Workshops Empower Youth

Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video Saudi, Yemen Developments Are Sudden Complications for Obama

The death of Saudi Arabia's King Abdullah and the collapse of Yemen’s government have cast further uncertainty on U.S. efforts to fight militants in the Middle East and also contain Iran’s influence in the region. VOA White House correspondent Luis Ramirez reports on the new complications facing the Obama administration and its Middle East policy.
Video

Video Progress, Some Areas of Disagreement in Cuba Talks

U.S. and Cuban officials are reporting progress from initial talks in Havana on re-establishing diplomatic ties. U.S. Assistant Secretary of State (for Western Hemisphere Affairs) Roberta Jacobson said while there was agreement on a broad range of issues, there also are some “profound disagreements” between Washington and Havana. VOA State Department correspondent Pam Dockins has the story.
Video

Video US, Japan Offer Lessons as Eurozone Launches Huge Stimulus

The Euro currency has fallen sharply after the European Central Bank announced a bigger-than-expected $67 billion-a-month quantitative easing program Thursday - commonly seen as a form of printing new money. Henry Ridgwell reports for VOA from London on whether the move might rescue the eurozone economy -- and what lessons have been learned from similar programs around the world.
Video

Video Nigerian Elections Pose Concern of Potential Conflict in 'Middle Belt'

Nigeria’s north-central state of Kaduna has long been the site of fighting between Muslims and Christians as well as between people of different ethnic groups. As the February elections approach, community and religious leaders are making plans they hope will keep the streets calm after results are announced. Chris Stein reports from the state capital, Kaduna.
Video

Video As Viewership Drops, Obama Puts His Message on YouTube

Ratings reports show President Obama’s State of the Union address this week drew the lowest number of viewers for this annual speech in 15 years. White House officials anticipated this, and the president has decided to take a non-traditional approach to getting his message out. VOA White House correspondent Luis Ramirez reports.
Video

Video S. Korean Businesses Want to End Trade Restrictions With North

Business leaders in South Korea are calling for President Park Geun-hye to ease trade restrictions with North Korea that were put in place in 2010 after the sinking of a South Korean warship.Pro-business groups argue that expanding trade and investment is not only good for business, it is also good for long-term regional peace and security. VOA’s Brian Padden reports.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid