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Thursday, January 21, 2010

ANA wants to prevent future bailouts for JAL!

That's why I called you the dark side, ANA! You are as evil as....I am! Their CEO has asked the Japanese government to adopt some rules to prevent a company (aka Japan Airlines) to receive government aid for 10 years after it has received aid!

According to CNN Money,

Ito said he asked the government to adopt some rules introduced in Europe to maintain appropriate market conditions such as banning the provision of additional public funds to a company for 10 years once it has received aid. A company with government aid shouldn't be "a price leader," he added.

ANA's main concern is JAL will use the bailout money to launch a price war. Therefore ANA will have to lower its price and may lose money as a result. This is a reasonable concern. And the Transport Ministry has already told them the bailout is to help JAL and not to create an unfair competition between the two carriers. And to be honest, both JAL and ANA's price are in general higher than some other carriers but yet ANA is doing OK. Not all passengers are only looking for the lowest price. If that's the case, they would have flown on carriers like AA and UA instead LOL.

To some extent, I agree with ANA that there should be some rules to restrict how many bailout a company can receive within a certain period of time because companies shouldn't receive endless government funding. BUT, for the airline case, things are a little bit different. International travel is highly volatile. Unpredictable events can destroy the travel demand! Even ANA had to receive bailout during the SARS outbreak! So why limit your future option just because JAL has received 4 bailouts in the last 10 years? What if there are events similar to SARS and you have already received a bailout because of another outbreak?

However there's one point I do agree with Mr. Ito. When asked about comments from the Transport Minister regarding "one international airline for Japan", Mr. Ito said,

"Competition is intensifying amid the open-skies deals. It doesn't make sense (to discuss) whether (there should be) one company,"

If Taiwan and Korea can have two international carriers, so does Japan!

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