Japan's Consumers Protest High Airfare Costs

JAPANESE traveler Yuji Shimokawa shaved one-third off his air fare to Katmandu last year. Instead of buying the entire ticket in Tokyo, he flew to Bangkok and picked up a discount fare. This year, however, his bargain-hunting begins at home. ``Tickets issued in Japan are not necessarily expensive now,'' says Mr. Shimokawa.

With a reputation for setting the world's most expensive fares, airlines in Japan and their government protectors are being drawn slowly into the turbulent market of competitive pricing, especially on international routes.

Shimokawa is one person helping them along. He is editor of Flight Kit, a magazine that caters to the newly adventurous Japanese.

The magazine, which debuted in April, bravely defies airline regulators by listing cut-rate fares. ``The government understands that it cannot stop the trend for discount tickets,'' he says.

The lower prices are possible because of an expanding practice of kickbacks given to agents by airlines. Rarely talked about in public, these clandestine payments allow everyone to stay just shy of a law that aims to keep Japanese ticket prices ``fair'' - in reality, fairly high.

``The Ministry of Transport just pretends that these discounts don't exist,'' says Ken Tamaki, a vice president of Japan Airlines (JAL). Jesus Duarte, industry analyst at W.I. Carr, Sons & Co., says that ``Japan sees its airlines as a public utility.''

Official published fares remain nearly as high as ever. ``Actual prices are usually half of the published price, except on business and first class,'' says Akira Nakamura, vice-president for Japan of Virgin Atlantic Airways, a new British airline.

Tokyo is a lucrative landing post for all airlines, that is, if they are granted a terminal slot at the city's overcrowded Narita airport.

Discounting has come slowly to Japan, spurred on by battalions of Japanese flying abroad to shop with their high-value yen, who bring back tales of cheaper fares abroad.

Consumer complaints embarrassed the government just enough to help force fares down about 10 percent over the past year. Japanese airlines, restricted to only three, are not too worried - yet. ``The number of people using discounts is still limited,'' says JAL's Mr. Tamaki.

Last year, however, JAL stopped honoring cheaper tickets imported from other countries into Japan.

While most Japanese still travel in groups, buying package tours, more individual travelers are seeking bargain fares to exotic lands.

``The airlines don't know how to respond,'' says Mr. Nakamura, except to use the awkward kickback system. In 1986, he says, 86 percent of Japanese traveled abroad on packaged tours. By last year, when the number of Japanese going abroad reached nearly 10 million, only 72 percent went on group tours.

For the coming decade, air travel inside Japan will grow 5.4 to 6.5 percent a year, higher than the 3.6 percent rise from 1975 to 1988, according to government estimates.

Overseas travel will slow down in the 1990s, rising at 5 to 6 percent, compared with the boom of 10.9 percent a year over the past decade.

Still, by the year 2000, the number of international trips in and out of Japan will be an estimated 24 to 29 million, far above the 1975 figure of just 3.9 million.

Airline regulators cite several excuses for Japan's high fares: high costs in general compared with other countries; not enough airport space to allow free competition; and pressure from politicians to keep airlines operating to small cities despite losses.

Bureaucrats even control such airline details as whether to serve hot or cold meals.

``If we had deregulation, politicians would have no influence over routes and fares, and they wouldn't get airports for their own areas,'' says Ushio Chujoh, a Keio University business professor who was fired last year from a Transport Ministry advisory council after speaking out in favor of deregulation.

Last year, the Fair Trade Commission and Economic Planning Agency both made muted calls for deregulation. Partial airline deregulation in the late 1980s, such as the privatizing of JAL and allowing it to fly domestic routes, has only built up pressure for more.

But there is a pinch on terminal space. The travel boom caught the government flat-footed. And plans to double airport capacity by the end of the decade are way behind schedule.

Completion of two new runways at Narita is delayed by protests and may be years away. A new international airport for Osaka, built on reclaimed seabed, is sinking even before it is finished, needing a 50 percent hike in budget to pay for more mountains of fill, before it can open after 1993.

The airport bottleneck has slowed down discounting on prices and moves to deregulate, although Mr. Nariai contends that the government could try market mechanisms, such as letting airlines bid for terminal slots.

But Japan is facing reasons other than consumer pressure to let its airlines fly free of controls.

Other countries are banging on Japan's door to open more routes. And because of high fares, Tokyo is slowly losing its status as the air hub of Asia, as airlines move routings to Seoul, Hong Kong, Bangkok, and Singapore, all of which are planning or completing airport expansions.

Japan's regulated market has made its airlines less efficient than their global competitors. JAL ranks in the bottom third of world airlines in worker productivity.

Eventually the government will be on the side of the consumer, says Hiroshi Muto, deputy director of the Transport Ministry's aviation industries division. ``We know the airport limits will not last forever. If consumers can just endure the next few years, we will have more competition,'' he adds.

``We fear problems if we change too fast.''

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