Airline

December 2001

The highly controversial plan to integrate the operators of the three major international airports at Narita, Chubu and Kansai is close to obtaining official approval from the ruling coalition. Frantic lobbying by some politicians to carry out this absurd proposal together with public corporation restructuring, the cornerstone of Prime Minister Koizumi's reform program, is paying off.  If the scheme is realized, it would damage Japan's aviation policy.  The proposed three-way merger is a thinly veiled plot to bail out Kansai International Airport Co. (KIA), the debt-ridden operator of the government-owned airport in the Kansai region.  The plan, devised by the Land, Infrastructure and Transport Ministry, would create a new public corporation in charge of land development and construction for the three airports.  Three new private businesses would be established to take over the management and operation of the airports, and the three would pay rents to the public enterprise.  In this way, KIA's huge land development costs would be shared by the two other airports. The objective is to keep KIA from going bankrupt due to massive debt, which would sharply increase if the airport is expanded as planned, and go ahead with the expansion project. This is a sure formula for placing all three airports in a financial bind.  Narita and Chubu, which would end up being forced to carry part of Kansai's debt, would find it impossible to slash their high landing fees. The operator of Narita airport has already proposed raising fees for international airlines.  This plan would make a mockery of Koizumi's reforms, designed to raise the international competitiveness of Japanese industries. By misusing Koizumi's reform agenda to address petty parochial concerns, the ministry is making the potentially disastrous mistake of forcing foreign airlines to bear part of the cost of building up the nation's infrastructure.  This scheme would also undermine Koizumi's emphasis on public sector transparency, accountability and efficiency, since it would make the financial standing of each airport very hazy. Japan's aviation policy would be shackled by the debt-heavy new public corporation for decades to come.  It is doubtful whether there is any economic need for the planned expansion of Kansai. If it is really necessary, the government should consider public financing for the project.  The management of Narita and Chubu also require a more thorough review, and all these issues should be sorted out before deciding to expand Kansai. However, the Transport Ministry is preoccupied with pushing through the dubious project.  This project would be an ugly blot on Koizumi's reform. The prime minister should thwart this plan if he wants to save the integrity of his program.  (December 17, the Nihon Keizai Shimbun)