SENECA COLLEGE
TOKYO INTL. HANEDA
Historical Analysis
John Campbell
11/10/2016
Professor Wafaei
Introduction
Tokyo’s airport system has expanded rapidly since the 1960s caused by deregulation and
the expanding middle class in Japan. This has impacted the aviation market significantly and large
investments have been made to support the growing traffic. This paper will analyze the growth of
Tokyo’s Haneda International Airport since its founding and how it has adapted to rapid changes
in the Japanese economy and deregulation.
Background Information
Tokyo International Airport (Haneda), also known as Haneda Airport (HND), was founded
in 1931 on a small piece of land located at the south end of the airport’s modern position. It was
the main operating base of Japan’s former flag carrier, Japan Air Transport, and handled daily
domestic and international flights to Japan, Korea, and Manchuria (North East China). Following
World War II, Haneda was occupied by the US Army for several years and operated as a regional
base for the United States Navy during the Korean War. Haneda was handed back to the Japanese
government in 1958 which allowed the airport to begin large expansions to accommodate the jet
age.
After some terminal and runway expansions in the 1960s, the Japanese government
commenced work to open a second airport (Narita) for international flights. After Narita airport
began operations in 1978, Haneda entered its “Domestic era”. Throughout this phase, pressure to
expand for international traffic subsided, however, Haneda officials foresaw extra domestic traffic
from deregulation which motivated the construction of a three new 9,800ft runways in 1988, 1998
2
and 2000, and the construction of a new terminal building “Big Bird” in 1993. Figure 1 illustrates
the evolution of these expansions.
Figure 1: Tokyo International Airport (Haneda) expansion timeline (1971-2007). (Watabe, 2012)
Domestic airline traffic in Japan has gone through a long history of growth and maturity
since its beginnings in the 1960s. Three airlines were founded then, and after the government
liberalized route entry and frequency regulations in 1985, multiple others began entering the
market. (Yamaguchi, et al., 2007) The Japanese government continued to deregulate the aviation
industry by introducing a zone airfare system in 1995 which aimed to accelerate reduced airfares
and foster the diversification of discount airlines. This fuelled the introduction of two new airlines
in 1998. The final step of deregulation in 2000 eliminated supply and demand regulations and
prior approval of airfares. Once these final deregulatory laws were passed, the market was
considered “fully competitive” and resulted in more rapid increases in annual market demand.
3
(Yamaguchi, et al., 2007) Emphasis was placed on airport expansion during these times as their
capacity (supply) was lagging behind market demand. Tokyo International Airport (Haneda) had
special priority as it was and still is today, the busiest and most valuable hub airport in Japanese
territory.
In 2015, Haneda International Airport processed 75,254,942 passengers. (Statista, 2015)
In perspective, Japan’s second busiest airport in 2015 was Tokyo International Airport (Narita)
which processed 34,751,221 passengers (less than half of Haneda).
Haneda airport has
experienced consistent growth since its founding in the 1960s and recently, annual passenger
traffic progressions of 2-3% growth are normal (Figure 1). However, in 2010 a new international
Figure 2: Tokyo International Airport (Haneda) passenger growth 2000-2015. (Statista, 2015)
terminal was opened and has since accelerated growth as Haneda attempts to break into the market.
Figure 1 demonstrates that Haneda has grown from 62.58 million passengers 2011 to 75.32 million
4
in 2015 which indicates 4% growth on average. Prior to the introduction of the international
terminal, growth was much shallower (2-3%). Since 1978, Haneda’s sister airport, Narita,
dominated the international market because the government strictly separated domestic and
international traffic in 1978 illustrated in Figure 2. due to the jet age causing a rapid increase in
Figure 3: Domestic and international traffic data; Narita vs. Haneda. (Japan Airport Terminal Co., Ltd, 2016)
demand, and Haneda’s inability to manage the extra traffic.
Haneda’s domestic era ended in June 2007 when the government began allowing
international arrivals during Narita’s closed hours. This caused international demand to slowly
increase and prompted the construction of a dedicated international terminal and fourth runway
(Figure 4) which was opened in 2010. This construction project alone increased Haneda’s
operational capacity from 285,000 aircraft movements to 407,000. Since then, Haneda has begun
5
to slowly steal the international market from Narita because of its preferable geographic location
relative to downtown Tokyo. Haneda’s location is 60 km closer to downtown than Narita which
Figure 4: Site construction of Haneda's international terminal and fourth runway. (Watabe, 2012)
is
attractive to business travellers and those visiting for the 2020 Olympics in Tokyo. Currently,
future expansions are being planned to account for the extra slots required to accommodate the
2020 Tokyo Olympic games. This includes a new railway line to Tokyo’s downtown train station,
and large terminal expansions. In a document prepared by Japan’s Airport Terminal Co., they
outlined a vision for Haneda to be the top airport in the world by 2020 in preparation for the
Olympic Games:
6
“Positioned as we are in the airline industry, and with the 2020 Tokyo Olympic and
Paralympic Games coming up, airport facilities in the Tokyo metropolitan region are being
enhanced, a new annual target of 40 million foreign visitors has been set for the year 2020,
and the demand for airport facilities and services is expected to continue rising.” (Japan
Airport Terminal Co., Ltd, 2016)
In order to accommodate the increase in demand, the Tokyo Airport Terminal Co. has created a
three level strategy plan to execute their goal of becoming the top airport in the world. They
include; “expand business domains that leverage strengths and diversify earnings”, “pursue
‘vision’ for Haneda airport”, and “redevelop earnings base and establish competitive position”.
The vision provided for Haneda’s 2016-2020 outlook is illustrated in Figure 5. It is clear that
Figure 5: Tokyo International Airport (Haneda) 2016-2020 vision. (Watabe, 2012)
Haneda airport officials have adopted a business value model and will focus on branding the airport
as a global ‘benchmark’ over the next four years. To execute Haneda’s vision, the investment plan
is allocating $1 billion spread across 4 years. Within this investment, $500 million (USD) will be
used for “security level enhancement, universal design for Tokyo Olympics”, $350 million to “the
expansion of business domains that leverage strengths and earnings diversification”, $100 million
for “redevelop[ing] earnings base and establish[ing] competitive position”, and $50 million for the
“realignment and enhancement of organization, human capital and governance.” (Japan Airport
7
Terminal Co., Ltd, 2016) With all expenses considered over the next four years, Haneda’s 2018
projections include an operating revenue of $2.38 billion and a consolidated operating profit of
$140 million which maintains their profit ratio goals of 5 percent.
Deregulation in the Airline Market
Airport capacity expansion in Japan paralleled regulatory reform by the government in
order to accommodate the increasing demand. In general, airport construction and expansion
with respect to deregulation was completed at the end of the 20 th century because no significant
reform laws have been passed since then. Growth today is mainly due to the effect of
globalization, increasing regional population, and the tourism industry. In order to analyze how
deregulation effected Tokyo’s Haneda airport, a historical perspective must be used for the
period between 1960 to 2000. In this period, the government implemented two major regulatory
reforms. They include; the promotion of double/triple tracking of domestic aviation, and the
regulatory reform of domestic airfares. (Yamaguchi, et al., 2007)
Double/Triple Tracking:
In the 1980s the airline industry was undergoing rapid change to adapt to the ever
growing demand in the aviation industry. The government recognized the instability of the
aviation market and decided to regulate the number of airlines capable of operating on one route
based on annual passengers. This became known as “double/triple tracking”. This framework
was laid out in 1985 by Japan’s Ministry of Transport whereby “double tracking” and “triple
8
tracking” were routes operated by two or three airlines respectively. The Ministry of Transport
was then responsible for setting the number of annual passengers required to allow double or
triple tracking. Originally, 700 thousand passengers were required for double tracking, and one
million for triple tracking. This regulatory policy was introduced mainly to foster balanced
development in the aviation market, however, over time it became evident that the double/triple
tracking constraints were limiting growth and competition. Thus, in 1997 the policy was
removed allowing any number of airlines to fly a route regardless of passenger volume. The
result was an increase in total available seats from 53% to 80% for the period between 1985 and
1999. (Yamaguchi, et al., 2007)
Regulatory Reform of Domestic Airfare:
The regulation of domestic airfares was introduced to limit the increase of airfares that
did not have proper reasoning for the increase. Thus, airlines were required to apply for airfare
increases during times of higher than normal inflation or increased fuel costs. The Civil Aviation
Bureau was responsible for this policy, and only allowed airfare increases up to a level which
balanced “income to aggregate cost under efficient operation”. (Yamaguchi, et al., 2007) Before
long, this was deemed market demand limiting and in 1996, a “zone airfare” system was adopted
which allowed airlines to set airfares up to 25% under the standard cost of routings. This system
allowed airlines to promote flexible airfares, seasonal fare sales, and flight-to-flight pricing
schemes, which has ultimately expanded the airline market in Japan.
9
Economic Impact of Deregulation
It has been examined in multiple economic studies that the deregulatory policies enacted
between 1980-2000 have had a positive effect on the Japanese airline industry. Through use of
econometric analysis, the demand relative to the introduction of deregulation was calculable and
has been illustrated in graphs. A secondary result has been an overall reduction in airfare prices.
In a study conducted by the Japanese Civil Aviation Bureau, they concluded the reason for the
economic improvements are due to:
-
Improvement of the income level per capita due to macroeconomic growth
-
Travel cost drop due to market economies of scale caused by deregulation (MLIT, 1998)
This economic growth is demonstrated in Figure 6 which illustrates the change in demand based
on thousand passenger km between 1985-2000.
Figure 6: Japan's passenger demand and average airfare curve. (MLIT, 2002)
10
The effect of the deregulatory policies at Haneda airport was difficult to analyze directly
as there are many variables that must be included. In a Japanese government analysis, they
studied the economic growth based on “user-benefit” by attempting to separate each policy and
compare it to the number of expansion slots at Haneda. User-benefit was defined as the
economic growth due to a certain policy or expansion enacted. What was found is each policy
had its own level of effect on the economy and number of slots at Haneda. They concluded that
the deregulatory policies were tied closely to the expansion of the airport. The data generated is
Table 1: User benefit of Japanese degregulation at Haneda airport (billion yen/year). (Yamaguchi, et al., 2007)
shown in Table 1. It can be observed in the data that slot growth at Haneda grew equally with
the demand generated by each policy introduced. It is especially clear when the introduction of
zone flexible fares occurred in 1995 where the extra 100 billion yen ($1 billion US) in demand,
caused a 50 billion yen ($5 billion US) increase at Haneda the following year. Overall, the study
confirmed that the user-benefit of deregulation between 1985 to 1999 was 440 billion yen ($4.4
billion US) per year on average. Of the yearly average user-benefit, it was suggested that 30% of
11
the it was due to Japan’s economic market growth, and 60% was a direct result of deregulation.
(Yamaguchi, et al., 2007) A graphical representation of this data is on Figure 7.
Figure 7: Graphical representation of user benefit caused by deregulation in Japan. ( (Yamaguchi, et al., 2007)
Conclusion
Tokyo’s Haneda International Airport has been undergoing significant develop over the
last eighty years. Multiple terminal expansions, runway additions and extensions, public
transport upgrades, and policy changes, have molded the airport into its modern form today.
Over the last 40 years, Haneda airport has been naturally responsive to deregulatory policies and
has also been directly competing with its neighbour airport Narita. Historically, Narita has dealt
with solely international traffic, however, since the international terminal expansion and runway
12
addition in 2010, it has slowly begun stealing the international market as it becomes the focal
airport in preparation for the 2020 Olympics. Haneda’s plan to prepare for the future increases
in demand was described to be both financially and globally aggressive as they take aim to be the
top airport in the world.
13
Works Cited
Japan Airport Terminal Co., Ltd. (2016). Medium-Term Business Plan. To Be a World Best
Airport. Tokyo, Kanto, Japan.
MLIT. (1998). Developing New Transportation Policies . Tokyo, Kanto, Japan.
Watabe, T. (2012). Development History of the Tokyo International Airport. Tokyo, Japan.
Yamaguchi, K., Ohashi, T., Ueda, T., Takuma, F., Hidaka, T., & Tsuchiya, K. (2007). Economic
Impact Anlysis of Deregulation and Airport Expansion in Japanese Domestic Aviation
Market. Tokyo, Chiyodaku, Japan.
14