Delta Ramps Up Its “All-or-Nothing” Strategy in Tokyo

Thinking about countries that have open skies agreements with the US, Japan is undoubtedly the least “open” of all. That’s because the most important airport in the most important Japanese city is highly restricted. But talks are coming to loosen things further, and Delta is getting ready to fight, encouraging a letter-writing campaign via an internal memo to employees sent last week. The strategy in a nutshell? “Give us everything we want or give nothing to anyone.”

When the US and Japan signed an open skies agreement, that enabled airlines to fly freely between the US and Japan… except to Tokyo/Haneda. Haneda had long ago been pushed into being the main domestic airport while newer Narita handled the international load. Haneda, however, is strongly preferred.

How so? Well here’s one of my favorite maps (that I just keep using over and over).

Narita is far and Haneda is close (plus, Haneda has a Godzilla-free ride into Tokyo). For people flying from the US to Tokyo, it might not matter as much. But for people living in Japan, it makes a tremendous difference. Of course, this wasn’t an issue when Haneda and Narita handled different geographies. But the airport built a new international terminal and added runway capacity. Airlines were allowed to begin international flights within Asia. Then the US and Japan signed an open skies deal.

Delta, which has long had a hub in Tokyo (via Northwest, which built it after World War II) wanted to move its entire hub over to Haneda because of its status as the preferred airport. But that just wan’t going to happen. In the end, US airlines were given four measly roundtrips a day between Haneda and the US.

There was a fight for these slots, though it soon became apparent that success was far from guaranteed. Hawaiian was a clear winner with its Honolulu flight, mostly because that flight serves Japanese people more than anyone. Plus, the flight times aren’t bad.

But service to the mainland struggled. American won the right to fly from JFK, and that bombed. American gave up the slot and United picked it up from San Francisco. Delta had the other two slots. While it still flies to LA today, it failed in Detroit, moved it to Seattle, and failed there as well. American will begin flying that slot from LA this year.

With Haneda being the preferred airport and a mere 4 flights on US carriers allowed, how could this possibly fail? Well, the deal between the US and Japan allowed flights to operate at Haneda only when Narita was closed during its nightly curfew. That means the flight times are pretty awful with evening departures going west and departures after midnight coming back.

The fact that there is a limit on Haneda operations is simply obnoxious. You can’t really call it open skies. (Yes there are slots at a place like London’s Heathrow, but there’s nothing saying airlines can’t acquire more there if they have the means. At Haneda, there is no option.)

Fortunately, talks been the US and Japan have been proceeding and they’re looking to open up daytime slots finally. But Delta is scared, and rightfully so.

See, ANA (which has a joint venture with United) and Japan Airlines (which has a joint venture with American) control the vast majority of slots at Haneda. So if operational restrictions are loosened, United and American will have access to whatever slots are needed, in theory. (That being said, the relationship between the US and Japanese carriers aren’t nearly as cooperative as those between the US and their European counterparts.)

Delta, however, operates its lonely (and shrinking) hub at Narita. If Delta doesn’t have the ability to move its entire hub over to Haneda, then the airline is threatening doom and gloom.

What will happen? In that internal memo to employees, Delta says it “would be forced, over time, to cut all seven of its direct flights between the U.S. and Tokyo-Narita.” That sounds highly unlikely to say the least.

In the memo, Delta likens it to the London situation at Heathrow and Gatwick where Heathrow is THE business airport while Gatwick is primarily for leisure carriers. It wasn’t always that way, because Heathrow used to be highly regulated and everyone else was pushed to Gatwick. Now that it’s been liberalized, no US airline is left over at Gatwick.

The reason that no US airline is left, however, is because those airlines could get the slots they needed at Heathrow. That wouldn’t be the case in Tokyo, where frequencies would still be restricted if this negotiation goes as planned. And for that reason, Delta should still be able to keep Narita a viable operation. But there is certainly the risk that Delta could lose some business, and that’s why Delta is gearing up for a fight.

Delta says that if it can’t move its whole hub, then the status quo should remain. That would be bad for consumers but good for Delta. After all, if consumers prefer Haneda as Delta states, then Delta is arguing against consumer preference.

What should happen? I can understand Delta’s concern and I think most airlines want the same thing in the end. There should be total liberalization. If airlines can acquire the slots they want, then let them. Stop with the protectionist garbage.

But the airlines diverge on how we should get there. Most airlines disagree with Delta and think that incremental liberalization should be encouraged if it’s the best we can get. It’s in the best interest of travelers even if it means baby steps. Baby steps are better than no steps at all.