One major difference between the airlines of the United States and those of the rest of the world is that all the U.S. airlines were completely privately owned. In Europe, Asia, Africa, Australasia, and Latin America, the major airlines were either privately owned, but at the same time regarded by their governments as “chosen instruments” thus given special privileges; alternatively, they were jointly owned by private investors and their governments, or they were completely government-owned.
The other difference was that, as observed in Chapter 19 regarding the development (or non-development) of regional airlines, the United States was, in the 1950s, almost the only country that was big enough to have both the need and the resources to permit a community of several financially healthy airlines. Brazil and Australia struggled to emulate such a system; while the Soviet Union and China were examples of countries whose politics (in which the airlines were effectively government departments) did not apply to ther fragmentation of a quasi-public utility. This factor, simply a matter of geography, meant that an approach to deregulation was invariably interpreted as a means of access to international routes, because few countries were big enough to need more domestic air services. And by the late 1960s, led by Japan, those countries that were industrialized enough to pursue massive expansion of domestic public transport, turned to a completely new form of transport: high speed rail. The effect on the balance of air-versus-rail public transportation was revolutionary and is discussed at the end of this book.
The adherence to internationally agreed fare structures was eroded to the extent that the role of the International Air Transport Association (IATA) as the agency for determining the system changed. Deregulation did not eliminate rigidly agreed fare levels, but it came close. Some airlines, notably several in east Asia, including the powerful All Nippon Airways, were not members of IATA anyway. Deregulation effectively put an end to what many had regarded as a stoutly defended international cartel fortress.
Thus, while the effect of the airline deregulation process in the United States was globally far reaching, the legislative process was not echoed in the same way. Airline corporate structures were different, the recognition and acceptance of the need varied in intensity, and legislative action took different courses. One common element was the perceived impression that the U.S. government had confirmed that private enterprise was to be stimulated, in the interests of free competition, without the handicap of hindrance from bureaucratic brakes or barriers.
In general, the governments of other countries interpreted the action to be taken as a call for a more liberal approach toward this relationship. In Great Britain, the move toward this objective took an extreme form and liberalization became privatization. Such was the revolutionary aspect of this course that neither the verb “to privatize” nor the noun “privatization” had found its way into the Oxford Dictionary.
The idea of a free market (or “market forces”) met with receptive ears in Great Britain, where the Conservative government, under the firm hands of Prime Minister Margaret Thatcher, needed little encouragement to de-nationalize several basic industries. Under the post-war Labour government, these had been created as national corporations. The principle involved was that certain industries, especially public utilities, vital to the national interest, needed direct government control. Through Parliament, they were responsible to the public and the idea was to free them from the shortcomings of market forces, however theoretically attractive their advantages might be. The British Overseas Airways Corporation (B.O.A.C.) had been formed, just before the outbreak of the Second World War, for that very reason, by a Conservative government.
Margaret Thatcher set about her privatization program with conviction and enthusiasm. Basic industries such as coal and steel production, British Rail, the telephone system, even London Transport’s famous double-decked omnibuses, all went under the parliamentary hammer. In 1980, by Act of Parliament, British Airways ceased to be a national corporation. The stock offering ended on 6 February 1987, with buyers oversubscribing more than 11 times.
The Prime Minister had a staunch ally in Lord King, Chairman of British Airways, which had been formed on 7 October 1971 by the merger of B.O.A.C. and British European Airways (B.E.A.). He brought in Colin Marshall as his chief executive, and together they set about changing the administrative direction of the national airline. They could justify draconian measures by pointing to heavy losses—hundreds of millions of pounds sterling—during the 1960s and 1970s, and soon the cold winds of commercial reality began to blow across the airline headquarters at London’s Heathrow Airport. Lax financial disciplines were tightened up, duplications of departmental activities were corrected, many areas that came close to being sinecures were abolished. The net result was that, during the years following the privatization, total staff numbers were drastically reduced, at all staff levels, by about 15,000, close to one-third of the total workforce. Yet the productivity of the airline did not suffer. This was the result of the new approach, recognizing that the driving force of any public transport organization was—obvious to an impartial observer—to serve the public. Too much emphasis had previously been placed on technical considerations, and British Airways had tended, often with apparent reluctance, to follow improvements to passenger amenities and convenience set by competitors, rather than, as the biggest European airline, to set those standards itself.
As the Jet Age matured during the 1960s and 1970s, the competition for equipment advantage had all but disappeared. The speed of all the leading airliners—Boeing, Douglas, BAC, or Sud—was about the same, and the new Airbuses were no faster. Also, any advantage gained by preferential access to lucrative markets had also diminished, as the major cities of the world could be reached by a wide selection of competing airlines. British Airways particularly faced competition from vigorous airlines established in former colonies or dominions. By the sheer quality of its passenger service, Singapore Airlines, the flag carrier of a tiny country of barely two million people, was voted annually as the world’s best airline. It was a hard act to follow, and to its credit, British Airways gradually rebuilt its reputation for good service in every respect.
One big advantage in the private sector was the access to capital. As a state corporation, British Airways had previously had to rely on funds from the Treasury, under the conditions (and often limitations) set by the Public Sector Borrowing Requirements allocations. These levels of capital were ultimately decided by Ministers who were often advised by interests that weighed the merits of other candidates for the public purse. The national airline did not always receive the essential investment for development or expansion, so the removal of this perceived handicap was of great benefit.
One of the main features of the deregulation of airlines in the United States was that it came abruptly—as the process took effect, perhaps too abruptly. Many of the established airlines did not adjust quickly enough or they reacted impetuously in the wrong direction. Elsewhere in the world, airlines had already had to move with the times, particularly in the field of determining the fares structure, individually or collectively. For many years, within Europe and, to a lesser extent, in North America, the scheduled airlines had watched their non-scheduled competitors, the charter airlines, develop low-fare vacation flights. Most non-business travelers would cheerfully exchange the privilege of a five-course meal or an ideal departure or arrival time if they could save 10% on the airline fare. The saving was often as much as a week’s hotel bill. So extreme was the differential between the opportunities offered by an inclusive tour package (airline fare plus hotel plus guide services and local transport) that during the winter season, when the operators offered rock-bottom sale prices to keep the airplanes flying and to keep the hotel rooms filled, a coal-miner from Newcastle or a steel-worker from Essen could spend Christmas in Tenerife more cheaply than if he had stayed at home. And he could take his family too.
In the northern countries of Europe—Britain, Germany, the Netherlands, and especially in Scandinavia, where cold winters cast people’s eyes to the south—the growth of inclusive tours was intensive. And the same people who made their annual visits to Spain’s Costa Brava or the Grecian isles were also the voters, and so governments had to take notice, by the late 1960s, that more intra-European passenger-miles were being flown by the charter companies (which had often been granted scheduled routes as well) than by the national “chosen instrument” airlines.
Following the end of the Second World War, with few exceptions, most of the world’s airlines had united to form IATA. This organization performed great service in setting standards of the basic service that airlines should offer to the public in terms of comfort, meals, and fares. Its somewhat dictatorial directives were defended on the basis that its members were merely agents for their parent governments, but IATA was perceived as an international cartel. Therefore, any attempts to break it usually met with public sympathy, which governments were well advised to recognize.
IATA did introduce tourist fares in 1952, and economy fares in 1958. Yet even the latter did not match the low fares that could be offered on long-distance routes by the charter companies, and by pioneers of the so-called Sixth Freedom traffic, such as Iceland’s Loftleidir. By the late 1960s, the trans-Atlantic market had, to a large extent, self-deregulated, as the charter companies had found ways of evading the strict application of national laws by applying long-distance affinity group fares. Bookings were made through a myriad of different organizations, such as sports or social clubs. A member of the United Kingdom Society of California could make a British Caledonian Airways round-trip from Los Angeles to London more cheaply than to fly one way by scheduled airline to New York. The non-scheduled airlines did a roaring trade, filling their airplanes, even at 3 A.M. This development extended to the populous markets of the northeastern U.S.; to the Great Lakes area, which benefitted from VFR (visiting friends and relations) traffic, especially from western Europe; and to the burgeoning vacation traffic from Europe to sunny Florida and Disneyworld. The travel brochures in London and Cologne offered bargains to Miami as they did to Palma.
The process of deregulation was thus effectively, if not officially, under way at least a decade before the 1978 Act. Even though the upstart “non-skeds” had intruded to take a share of the world market, air travel as a whole was expanding so quickly during the period that other airlines, on both sides of the Atlantic, were anxious to share the lucrative trans-ocean air travel business. This universally held desire became a ground-swell of corporate persuasion and lobbying, which met with agreeable governmental response. This led to a top-level meeting of the minds in an historic collaboration between the United States and the British governments in 1977. This resulted in a far-reaching bilateral agreement that became known as “Bermuda II,” as it was regarded as a successor to the first, and famous, Bermuda Agreement of 1946. This had first laid down agreed shares of capacity, frequencies, and other conditions of airline service that protected the signatories from excessive and possibly predatory competition. The main issue—a year before the U.S. deregulation that concerned only the domestic industry—was the admission of additional airlines into the hitherto protected intercontinental domains of Pan American, British Airways, T.W.A., and Northwest. Some new airline insignias began to appear at the international gateway airports on both sides of the Atlantic and of the Pacific. Resulting from the conclusions of the Edwards Report in 1969, British Caledonian Airways (B-Cal) had already been given a limited share of British overseas scheduled air routes, and this included services alongside B.A. to New York and Los Angeles, which were called dual-designation cities. Thus, under Bermuda II, B-Cal was the obvious choice to meet the provisions of the Agreement.
The U.S. Civil Aeronautics Board (C.A.B.), still the airline regulator, acted in a measured manner that was a credit to its awareness of the sensibilities of the regulated. For selected new city pairs, the designated airlines gained reciprocal traffic rights, but protection was assured against predatory moves by the incumbent (by excessive flight scheduling) by awarding exclusive rights to only one company to one of the pairs of cities for a period of three years. This would also provide the opportunity to test the market to ensure that forecasts of traffic increases (possibly designed to support the case for entry) had not been overoptimistic. B-Cal started Douglas DC-10 service to Houston in October 1971 and Delta Air Lines began from Atlanta to Gatwick on 30 April 1978. Continental Airlines gained a route from Dallas/Fort Worth and, in company with Delta, was obliged to land at Gatwick, London’s second airport (and one of Europe’s busiest).
The whole process of international deregulation involving the United States was thus not carried out by a single blow of the legislative axe, as had been the case with the domestic routes. Over a period of a few years, the deregulated environment emerged, not at the stroke of a pen, but as the result of several bilateral negotiations that effectively were already part of the underlying objectives of deregulation. And the process continued. The irrepressible Freddie Laker got into the spirit of the Act. After less than two years with its new-found American destinations, B-Cal decided to pull out from New York and Los Angeles, and in 1975 the responsible British Minister cancelled the dual-designation authority. Laker challenged this action, claiming that Peter Shore had “broken his own law,” and won the day, giving Laker Airways access to New York.
Interestingly, one result of the whole process of liberalizing the scheduled airline structure was that the low-fare differential that had been the main marketing advantage of the charter airlines, including the U.S. Supplementals, was eroded, to the extent that the low-fare traveling public could also find bargains with the established scheduled airlines. The IATA members, responding to what are loosely described as market forces, had achieved their objectives of sustained growth, not by eliminating much of the threat from the group charterers, but by adopting the policy of “if you can’t beat ’em, join ’em.” Rigid IATA control of international fares was a thing of the past.
One of the most astonishing developments of the Jet Age has been the creation and subsequent rise to prominence of Japan’s All Nippon Airways (A.N.A.). When the British B.O.A.C.’s de Havilland Comet shattered all airline speed records in May 1952, even A.N.A.’s predecessor companies did not exist. Yet half a century later this airline was to be the launch customer for a new generation of technically advanced commercial airliners.
A.N.A. was formed on 1 March 1958 (only eight months before B.O.A.C and Pan American opened trans-Atlantic jet services) by the merger of Far Eastern Airlines (Kyokuto Koku) and Japan Helicopter and Aeroplane Transport Company (Nihon Herikoputa Yuso Kabushiki Kaisha [N.H.Y.K.K.])—known familiarly as Nippeli—founded respectively on 26 and 27 December 1952. The merged fleet was small in size and type, with de Havilland Doves and the ill-fated Handley Page Marathons operating short-haul routes throughout Japan. The veteran Douglas DC-3 was A.N.A.’s flagship. In August of its first year, a DC-3 crashed, so that the aspirant second-force airline’s start was far from auspicious. Its entry into trunk-line service, on 1 April 1959, was modest enough, with DC-3s, but these were soon supplemented, on 10 October of that year, with pressurized Convair 440s, and All Nippon airliners were to be seen at every major city of Japan. On 1 August 1960, in tune with the explosive growth of airline service throughout the country, it introduced turboprop service with four-engined Vickers Viscounts on the trunk routes, and on 10 July 1961, twin-engined Fokker F.27 Friendships on the shorter routes.
Between 1960 and 1964, All Nippon’s average annual passenger growth rate was an unprecedented 53%. This reflected the phenomenal economic growth of Japan as its post-war recovery completed the transformation of the nation from a partly industrial, partly rural or agricultural, society into a world powerhouse, with its cameras, radios, electronics, and soon, motor cars demonstrably superior to all others. In 1960, the prime minister called for the doubling of the gross national product in 10 years. Japan achieved it in five.
Recognizing that efficient airline service, with competitive incentives, was no enemy of industrial growth, the Japanese airline authorities did not, as did the United States’s C.A.B., favor the incumbent airline, Japan Airlines (J.A.L.), on domestic services. For international services, it continued to be the “chosen instrument,” and a very effective one. J.A.L. had entered an already highly competitive field and not only held its own, but had set a fast pace, introducing new standards of cabin service. If these innovations, which amounted to little more than better attentiveness by the flight attendants, did not put the European and American airlines to shame, they certainly kept them on their toes. J.A.L. carried its flag with honor and pride, and its nation was content to allow it to remain that way, unchallenged from Tokyo, at least for a while.
Meanwhile, during the late 1950s and early 1960s, All Nippon had established its own hub-and-spoke route system in what were termed beam routes, as they radiated from Tokyo and Osaka like the beams of the sun; these were operated intensively by the Viscount and Friendship turboprops. The last DC-3 was retired on 15 March, and several events combined to serve notice that A.N.A. was to be a major component in the future development of Japanese commercial aviation. On 25 May 1964, it started pure-jet service with a leased Boeing 727-100 on the Tokyo-Sapporo route, which, partly through such enterprising policies, was to become the busiest in the world. Also, during August and September, it signed partnership agreements with several smaller airlines, including the transfer of a few of its smaller routes to them (an action that would later be termed code-sharing), and it purchased Fujita Airlines on 1 November 1963, Central Japan Airlines (Naka Nihon Koku) on 25 January 1965, and Nagasaki Airlines on 1 December 1967.
The historic opening, in August 1964, from Tokyo to Osaka via Nagoya and Kyoto, of the Shin Kan-sen, the world’s first high speed railroad—the term belies the fact that start-to-stop speeds in excess of 100 mph effectively created a new form of transport—did not affect A.N.A. as much as it affected J.A.L., of which the domestic system was restricted to the busy trunk routes that the “bullet” trains would serve. Also, on 30 November 1964, A.N.A. not only retired its last piston-engined aircraft, the Convair 440, but it introduced, on 20 September 1965, a third turboprop type, the twin-engined Nihon YS-11, which had as many seats as the four-engined Viscount. That the airline launched a home-built product that could be successful in world markets might have been politically useful in its drive toward recognition as an industry leader.
But the way toward such status had to include the operation of international routes, and that way was strewn with obstacles, some from government policy, some from vigorous opposition from J.A.L., whose dominant role in post–Second World War Japan was a latter-day parallel with Pan American Airways’ quasi-monopoly role in the pre-war United States. All Nippon had to negotiate this obstacle course toward the fulfilment of international status methodically and opportunistically. It even overcame one or two self-imposed obstacles of its own, as well as facing increased competition on its domestic routes from J.A.L., which moved, with government approval and direction, to claim a share of the homeland business. So in Japan the deregulation process took an entirely different course, a balanced judgment by, on the one hand, a wise aviation administration that guarded against overambitious expansion or self-destructive competition that could be disastrous; on the other hand, courageous and visionary enterprise by an airline that saw its future as something more ambitious than as a second force to a chosen instrument.
An indication that government airline policy was not averse to this objective was the consolidation of airline routes and services within Japan. Far from the fragmentation of airlines that a free-for-all deregulation process would have produced, the opposite course was taken. On 15 April 1964, Japan Domestic Airlines (J.D.A.) was formed by the merger of North Japan Airlines (Kita Nihon Koku), Nitto Airlines, and Fuji Airlines. Kita Nihon, founded on 30 June 1953, had served the north. Its Convair 240s were a familiar sight in Hokkaido. Little Nitto, founded in Osaka on 4 July 1952, had started services across the Inland Sea to Shikoku, with Grumman amphibians. Another small company, Fuji, founded on 13 September 1952, operated small Pipers and Beeches to offshore islands.
Discussions were held with a view to A.N.A. merging with Toa Airways (see also later in this chapter), but these were not pursued at the time. J.D.A. was effectively in partnership with J.A.L., which provided technical, commercial, and administrative advice and assistance, and this resulted in J.D.A. becoming a jet operator on 15 March 1966, with ex-J.A.L. Boeing 727-100s. On 20 May of the same year, the Ministry approved the complete merger of the two airlines. But these plans did not reach fruition.
Meanwhile, the Second Force, All Nippon, had not been idle. The understanding had been that, while J.A.L. would operate the trunk routes between the major metropolises, A.N.A. would be responsible for all the feeder routes to secondary cities and other communities. On 4 June 1970 came a breakthrough. An Aviation Committee of the Ministry of Transport announced its Principles of Air Transport Policy, one of the clauses of which stated that “A.N.A. should be given permission to operate short-range international routes in the future.” The airline wasted no time. On 1 July—only a month later—permission was received to operate charter flights to South Korea, and before the end of the month, two YS-11 flights were made from Osaka and Fukuoka to Pusan.
All Nippon Airways now had the bit between its teeth. Its expansion on all domestic airline fronts was phenomenal. On 16 August, it carried more than 30,000 passengers in the single day, at a load factor of more than 92%. On 4 November it made a survey flight to Hong Kong and, early in 1971, began charter flights, from Tokyo on 21 February and from Osaka on 21 March. On 3 August Bangkok was linked with Nagoya, and on 31 March 1972 with Kumamoto. By the end of 1971, 24 flights had been completed to Hong Kong, 31 to Bangkok, and the airline was scheduling 15 round-trips per month. During 1972, Jakarta, Kuala Lumpur, and Singapore were added as charter destinations, informal approaches were made to China, and on 28 August 1973, a charter flight was made from Hakodate to Khabarovsk, in the Soviet far east.
Such was the explosive growth of the airline—in the month of August 1972 alone it had carried one million passengers—that it had to undertake an ambitious aircraft procurement program; this involved one of its “self-imposed obstacles.” A.N.A.’s traffic levels demanded larger aircraft than the 178-seat Boeing 727-200s, which had gone into service on 1 October 1969, supplementing the smaller Boeing 737s on 20 June. It had to have twin-aisled wide-bodied aircraft. Lockheed demonstrated its L-1011 TriStar on 23 June 1972, and Douglas its DC-10 trimotor three days later. The decision apparently favored Douglas, as its plant at Long Beach, California, allocated six aircraft on its production line to A.N.A. These were ordered through the Mitsui Bank, acting on the airline’s behalf, and in which it had a strong financial interest. Following manufacturer-customer tradition, Douglas sent airline support representatives to Tokyo to review maintenance procedures and spares supplies and other technical requirements. Then, one fateful day in September, they were refused admission to the airline’s engineering base. No explanation was given, but on 30 October, A.N.A. placed an order for 26 326-seat TriStars. The big aircraft went into service on 10 March 1974, from Tokyo to Okinawa, and was soon deployed on all the densely traveled domestic trunk routes. Kagoshima received the L-1011 on 20 July, only 17 years after its first airline service, with the 8-seater de Havilland Dove—such was the measure of A.N.A.’s spectacular expansion as Japan’s Second Force airline, but now claiming something very close to parity.
On 4 February 1976, the deal was revealed to have resulted from a huge bribery scandal at the highest levels of both airline and government. Political influence could have stemmed from a meeting in Honolulu, only a few weeks before the October 1972 announcement, between Prime Minister Tanaka and President Nixon, accompanied by Henry Kissinger. Lockheed desperately needed orders, and its $250 million bank loan had been covered by a U.S. government guarantee. A prominent Japanese businessman committed suicide; Tanaka was arrested on 27 July 1976, and resigned. Lockheed’s chairman, Carl Kochian, revealed most of the sordid details before the U.S. Securities and Exchange Commission, and the matter was investigated in the U.S. Senate.
All Nippon Airways pursued its destiny. On 19 July 1975, it had applied for permission to fly five international scheduled routes, including one to Taipei and Hong Kong; but was forestalled by J.A.L. establishing Japan Asia Airways (J.A.A.), specifically to serve Taiwan and to avoid a potentially bitter dispute with mainland China when services to the People’s Republic could be inaugurated. But A.N.A. had served notice of its ambitions and backed its faith by ordering, on 1 September 1977, three Boeing 747SRs, with an option for eight more. Specially matched to the demands of routes such as Tokyo-Sapporo, Osaka, and Fukuoka (three of the world’s five busiest), these double-decked giant airliners were fitted with 528 seats for both A.N.A. and J.A.L.
From its introduction of affinity group charters in 1971, All Nippon had, by 20 May 1978, when Tokyo’s new international gateway airport at Narita was opened, carried half a million passengers to almost every eligible tourist destination in east Asia. As if to recognize the irresistible market force of this huge leisure activity, in that year the Ministry of Transport introduced the authority to operate Inclusive Tour Charters (I.T.C.s)—exactly what All Nippon needed. On 29 September it founded ANA World Tours. The first charter flight under the new legislation was from Sendai to Beijing on 15 August 1979. During the next few years, ANA World Tours was shepherding flocks of tourists to the Philippines, Malaysia, and Guam, and on 24 September 1984, it flew a full load into Honolulu. By this time also, on 21 June 1983, A.N.A. had introduced the highly efficient Boeing 767 on its domestic network.
A.N.A. was created in the 1950s. Kyokuto Koku (Far Eastern Airlines) and ‘Nippeli’ were two small airlines that merged in 1958 to become Japan’s second force airline.
A.N.A. moved ahead with an energetic program of expanding its domestic routes, familiarly known as the “Beam Lines.” By a dynamic increase in traffic, A.N.A. ranked, by the 1970s, as one of the world’s leading airlines.
A.N.A. and J.A.L. competed vigorously for the dense traffic on the inter-city trunk routes. Toa and Japan Domestic Airlines competed for the secondary and regional traffic. Eventually, the two merged to form Toa Domestic Airlines, which, in 1988, changed its name to Japan Air System.
The potential in Japan, an island nation, for the air freight (or air cargo) business was enormous. Throughout the post-war years, long-range four-engined airliners such as the Lockheed Constellation and the Douglas DC-6 seemed to have the potential for carrying goods as well as people and mail. But optimistic forecasts for a great future in air freighting had come to nought. Airlines such as Flying Tigers and Seaboard & Western had made valiant attempts to establish a permanent foothold in the market, but had been handicapped by the successful development of the passenger airliners, whose carrying capacity allowed a margin for carrying freight, customarily in the lower holds, as well as the revenue passengers. For the big airlines, carrying freight was a welcome bonus, and the flexibility of service destinations provided by their wide-spread route networks gave them a big advantage over the air freight specialists, which had to depend on full or almost-full loads on every route operated. Another, almost fundamental, problem was that most passengers, traveling for business or pleasure, made round-trips. They invariably came home, whereas air freight did not. Consequently, lucrative contracts for delivering export cargoes needed reciprocal contracts to avoid aircraft returning to their bases empty.
By the 1970s, however, the sheer volume of air cargo demand worldwide had grown to the extent that most of the big intercontinental airlines were allocating some of their aircraft—even the first-line types, not only the older ones relegated to the role—to all-cargo services. The basic pattern of the best all-cargo routes comprised the trans-ocean air arteries between North America and Europe (trans-Atlantic), between North America and the far east (trans-Pacific), and between Europe and the far east (trans-Asia). Within the Soviet Union, where much of the land east of the Ural Mountains still lacked surface transport, air cargo flourished.
The big Antonov and Ilyushin freight aircraft provided the life lines of trading and supply throughout the vast areas of Siberia. Yakutsk, the traditional inland trading city of northeastern Siberia, with a population of more than 200,000, did not have a railroad connection to the rest of the country.
Of the non-Soviet air freight arteries, the trans-Pacific ones held the greatest promise. Except for China, still politically introspective, the entire area of eastern Asia, from Korea and Japan in the north to Malaysia and Indonesia in the south was, from the late 1960s, experiencing a dramatic expansion of its industrial base. Led by Japan, factories were established that could manufacture consumer products with labor rates that were often a fraction of those in the developed western world. The result was a booming export trade in a wide variety of commodities, many of which were intrinsically of high value by weight, such as cameras, watches, precision instruments, and radios and televisions. While larger items such as motor cars went by ship, many of the other products could be flown economically to the biggest market, the United States, by air.
All Nippon Airways founded Nippon Cargo Airlines (N.C.A.) on 24 September 1978, and this could be viewed, in retrospect, as the turning point in the parent airline’s drive toward world status. For it opened doors that, by international airline convention and tradition, enforced by government or government-supported agreements, had hitherto been closed to it. Eventually, on 3 April 1985, a binding agreement was signed between the controlling government agencies of Japan and the United States. The main features were that J.A.L.’s monopoly of Japanese flights to the United States ended and A.N.A./N.C.A. were designated for trans-Pacific routes. Between Japan and Micronesia—still under U.S. stewardship—two airlines from each country were permitted. A.N.A. had started charter flights to Saipan on 9 July 1984. Most important, and with far-reaching implications, from 1 April 1986, new U.S. destinations would be permitted: Washington (designated to A.N.A.) and Atlanta (to J.A.L.). These supplemented the existing gateways at San Francisco, Los Angeles, New York, Seattle, and Chicago.
There was no stopping A.N.A. now. It completed its scope of the Pacific Rim (as all the countries bordering the ocean had collectively become known) on 24 September 1985 by its first charter flight to Perth (albeit on the Indian Ocean coast); Sydney would soon follow. On 3 March 1986, Japan’s Second Force airline started its first scheduled international route (excluding Okinawa) with Tokyo-Guam service, to give notice that its status versus J.A.L. was no longer secondary but was as an equal competitor.
On 16 July 1986, services opened to Los Angeles, followed 10 days later to Washington, prestigiously the capital of the world’s biggest industrial power and the seat of government and therefore influence. The Boeing 747 route to Los Angeles was in parallel with Japan Airlines, but the one to the federal capital was different. It was the nonstop capital-to-capital flight between Japan and the United States and was a landmark event. More long-range cities, either by scheduled or charter flights, were added in swift succession during the next two years. On 16 July 1989, All Nippon “invaded” Europe, first with a service to Vienna (purchasing a 9% shareholding in Austrian Air Lines) then, on 22 July, to London, the biggest gateway in Europe. Moscow, Paris, and Brussels followed within a year, and on 9 March 1991, scheduled service opened to New York.
On 1 January 1989, A.N.A. had joined the IATA and was thus subject to the operating conditions that applied to all its members. But by this time, the restrictive levels of fares had become moot. IATA must have been pleased to welcome the Japanese company that had long kept aloof, yet had grown to rank among the world’s largest passenger-carrying airlines. On 27 April of that year, it ordered 20 Boeing 747-400s to add to its already large fleet. Such a level of achievement was unprecedented. All Nippon Airways had been born only 31 years previously, and its flagship had been a well-worn DC-3. Now it was a world leader. And in little more than another decade, it was to make its mark on the course of air transport development with an equally unprecedented innovative decision. Not only that, it was a determined survivor. Almost as a textbook proof of private-enterprise success against a government-supported chosen instrument, All Nippon Airways continued normally when Japan Airlines filed for bankruptcy on 20 January 2010.
In the late 1970s, the United States had plunged into a deregulated airline environment in which the immediate consequences were neither immediately apparent nor achieved. The Japanese airlines and their regulators, however, took a different course. This was partly because Japan is a much smaller country and less amenable to regional airline viability, but also because the authorities recognized airlines as a public utility and not simply as just another form of business. The outcome was almost a textbook example of an economic axiom: that the benefits of competition can be realized with only two or, at the most, three competitors. Japan had perhaps learned from watching the process as it developed in the United States, and perhaps, as an island nation like Great Britain, realized that some of its territory did not lend itself to competition at all, because the traffic from outlying communities was just not enough to satisfy such a demand.
On 30 November 1953, Toa Airways had been formed in Hiroshima and specialized in providing service to Kagoshima, in southern Kyushu, and further south to the islands of the Ryukyu group, some of which were becoming vacation destinations. During the 1960s, it had made agreements with All Nippon Airways, itself not yet dominant in the domestic arena, for the transfer of routes from Kyushu into southwest Honshu and gave it, most importantly, on 15 June 1964, access to Osaka. Toa’s fleet had been quite modest. The island services had been operated mainly by de Havilland Doves and Herons, with Convair 240s connecting the bigger industrial cities of northern Kyushu with Kagoshima and Hiroshima. Its entry into the Jet Age was not spectacular—just a few YS-11 turboprops on order as it quietly added regional routes to its still regional network.
The small airlines were handicapped by the acute shortage of pilots, because of the depredations of the war, during which more than 1,500 had turned themselves into human bombs as kamikazes. The demobilized survivors invariably found employment with Japan Air Lines and All Nippon Airways, which gave the regionals a problem. They had met this by taking advantage of the Japanese aviation laws, which allowed airlines to operate with non-scheduled certificates, flying aircraft with pilots who did not require a full airline ATR rating. This helped the small airlines to become established, but sooner or later, they had to move up technically into the higher echelons of air service. And with the explosive expansion of the Japanese economy in the 1960s, this had to be sooner than later. Thus a natural sequel, from the point of view of both the small operators and the administration, there was an urge to merge.
The first such amalgamation took place on 15 April 1964, when Nitto and Fuji joined the larger Kita Nihon to form Japan Domestic Airlines (J.D.A.) (see above).
All Nippon was charging ahead, so the next step seemed almost inevitable. On 15 May 1971, J.D.A. merged with Toa Airways, apparently closely associated with All Nippon, unofficially if not in corporate terms, to become Toa Domestic Airlines (T.D.A.). J.A.L. had only a minority shareholding, but two of the railroads had 35%, so that this latest amalgamation was, as yet, uncontrolled by the trunk carriers. By this time, incidentally, the development of Japan’s innovative high speed railroad, the Shin Kan-sen (effectively, as mentioned earlier, a new form of surface transport, far superior in speed, if not in service standards, to Japan’s meter-gauge rail systems) was taking over traffic between the big cities. Yet such was the tremendous growth of travel demand that the airlines still continued to grow at a brisk rate. The railroad interest could have been a means of self-protection.
T.D.A. was quick to spread its wings, riding high on the wave of explosive growth of the Japanese economy. On 1 August 1972, it introduced Boeing 727-100s on the Tokyo-Oita route, on 1 September Tokyo-Kagoshima, and on 1 October, Tokyo-Fukuoka. With further route additions, mainly to points in Kyushu, Japan’s third airline was making a statement in the skies of southern Japan. On 4 June 1973, it leased a Douglas DC-9-31 and soon followed, on 1 December, with the larger DC-9-41s, which were fitted with a wide-body interior layout. The inaugural service with this Douglas twin was from Tokyo to Kushiro, in eastern Hokkaido, so that T.D.A.’s name became familiar over the length and breadth of all the Japanese islands.
On 1 March 1975, service began on the Tokyo-Sapporo and Tokyo-Fukuoka trunk routes—two of the world’s five busiest air routes. But following the disciplined approach by the Japanese controlling authorities, the competition with the incumbent Japan Air Lines and All Nippon Airways was regulated by standardized fares and negotiated scheduling. The system could be described as organized deregulation. It was not a free-for-all, almost open-skies policy, as practiced in the United States after the sweeping effects of the 1978 Airline Deregulation Act; neither was it like the former tight Australian dual-airline policy. It was an intelligent compromise that encouraged good service, yet prevented wild excesses.
The system worked. In July 1978, T.D.A. began “double-tracking” a number of All Nippon Airways’s routes, from Tokyo to Kagoshima, Kumamoto, and Hakodate. These were in parallel with A.N.A.’s beam routes, but the latter did not suffer from the added competition. T.D.A. now had the bit between its teeth and, on 1 March 1981, introduced the 281-seat Airbus A300 on Tokyo-Kagoshima and the 163-seat Douglas DC-9 Super-80 on Tokyo-Oita and Tokyo-Misawa. Finally, on 1 November 1983, T.D.A. entered the Tokyo-Osaka market, linking Japan’s two biggest cities.
The airline was no longer taking third place to its two senior partners. Operationally and technologically it was their equal, if not measured in numbers of passengers carried or in the size of its fleet. And further consolidation of its status continued, almost as an echo of All Nippon’s rise to prominence a decade earlier. It had, at the other end of the scale from its acquired trunk airline status, established Japan Air Commuter (J.A.C.) on 1 July 1983, having ordered the short-strip-friendly 19-seat Dornier 228 in May, and this versatile aircraft started services from Amami-Oshima, one of the larger islands of the Ryukyus, on 10 December 1983.
Ever versatile, T.D.A. offered, from 17 March 1985, helicopter flights to Tsukuba, about 30 miles north of Tokyo, for the Science Expo held there. The route was triangular, linking both the Haneda and Narita airports. But far more important and far-reaching, again echoing A.N.A.’s progress, was flying its first international charter, from Osaka to Seoul, South Korea, on 19 September 1986. As if to announce its elevation to the big leagues, a contract was signed for 300-seat wide-bodied Douglas DC-10s on 28 October, and the next year, on 27 April, T.D.A. joined IATA. To emphasize and to symbolize its achieved ranking into the highest echelons of airline stature, the name of the airline was changed, on 1 April 1988, two days after the first DC-10 was delivered, to Japan Air System (J.A.S.).
The identity of little Toa, respected though it was for its pioneering in the Ryukyus, and hitherto restricted by the very word domestic; these memories were now consigned to history. J.A.S. quickly began to spread its wings far beyond the confines of the Japanese homeland. On 1 July 1988, the route to Seoul was upgraded from charter to scheduled status, the commuter subsidiary was operating 60-seat YS-11s, and charter flights began to Honolulu on 17 June 1989, and to Singapore on 3 February 1990. The first Airbus A300B4-600, larger than its predecessor, with 308 seats, was delivered on 29 April 1991. On 3 June of that year, to round off a triumphant progression of events, scheduled service started to Honolulu, which had become a major Japanese tourist destination. This had resulted from the negotiations with the United States, which had brought All Nippon Airways across the Pacific, and with its arrival at the 50th State, 20 years after the Toa–J.D.A. merger, Japan Air System had come of age.
Few airlines in an industrial society could have had a more modest beginning than Toa Airways. This 20-seat de Havilland piston-engined Heron is photographed at Hiroshima. (Bentley)