Tokyo-Haneda International Airport

MIAMI — In recent weeks, U.S. carriers bidding for new route authorities to Tokyo Haneda (HND) have had the opportunity to present additional details to augment the merits of their route proposals. In the meantime, the United States Department of Transportation (DOT) have weighed these submissions against an evolving mosaic of commercial conditions through an objective lens.

However, as has always been the case with HND, there are so many outlying attributes to consider that the DOT may as well be looking through a kaleidoscope rather than a magnifying glass as they conduct their evaluations.

In summary, the DOT has tentatively awarded five daytime slots to the following carriers on the following routes:

  • Delta Air Lines: Los Angeles, Minneapolis/St. Paul
  • American Airlines: Los Angeles
  • United Airlines: San Francisco
  • Hawaiian Airlines: Honolulu

Ever since the 2010 amendment to the 1952 Civil Air Transport Agreement between the U.S. and Japan — which effectively opened up a limited number of air traffic freedoms between United States airports and Tokyo Haneda — the distribution of available slots has been a perpetual saga for all interested parties and regulatory agencies.

The Memorandum of Understanding (MOU) signed in 2010 created four nighttime/early morning slots available to U.S. carriers, subject to operations solely between the hours of 2200 and 0655. At present, the four U.S. carriers who operate flights into Haneda must abide by this MOU, and return departures from Haneda to the lower 48 contiguous states must leave after Midnight.

Current USA - Tokyo Haneda Routes: ANA (HND-LAX, HND-HNL) and JAL (HND-HNL, HND-SFO)
Current USA – Tokyo Haneda Routes: ANA (HND-LAX, HND-HNL) and JAL (HND-HNL, HND-SFO)
Current USA - Tokyo Haneda Routes: American (LAX - HND), Delta (LAX - HND), Hawaiian (HNL-HND) and United (SFO-HND)
Current USA – Tokyo Haneda Routes: American (LAX – HND), Delta (LAX – HND), Hawaiian (HNL-HND) and United (SFO-HND)

This has created an extreme level of noise among U.S. carriers – and rightfully so – given that these hours of operation are nothing short of ineffective in terms of drawing lucrative traffic on U.S. – Haneda flights.

The primary grievance has been that nighttime departure and arrival slots are nonviable from any region in the U.S. beyond the West Coast or Hawaii, with limited connection opportunities on the Japanese end, as well as severely reduced public transit options upon arrival into Tokyo (hence muting the benefits of flying into Haneda airport rather than the more distant Narita airport).

However, an amended U.S. – Japan open skies agreement that was signed on February 18, 2016 not only increased the number of available slots to US carriers from 4 to 6, but also permitted five of these to operate during daytime hours, specifically between the hours of 0600 and 2255.

The 6th arrival and departure slot will remain during the nighttime hours, between 2200 and 0655. The daytime slots will become available to U.S. carriers on October 30, 2016 for the IATA Northern Winter 2017 schedule period.

The agreed-upon timeline called for a procedural schedule commencing on April 21, during which interested carriers submitted their applications for consideration.

Additional submissions in the form of, “arguments and evidence supporting their respective service proposals,” also known as “answers,” were due by May 5, and the ability to respond to each other’s’ proposals, known as, “replies,” took place on May 12.

However, given that Japanese route authorities required all current tenants at its airports to submit schedules for the IATA Winter season on May 19, 2016, all four U.S. operators were automatically granted temporary access to the daytime slots that will become available at their disposal on October 30.

This temporary, so-called, “grace period” will remain in effect until the conclusion of the IATA Winter 2016 season on March 27, 2017.

Beyond the March 27 date, however, all proposals had to be submitted and re-evaluated for consideration.

The decision took long enough for the US D.O.T.

Per usual, the coordination between the U.S. DOT. and interested bidders is best characterized as a, “hurry up and wait” scenario. Though the DOT was candid about the fact that a decision could not be reached given the 1-week turnaround time between the deadline for interested party submissions on May 12 and the Japanese schedule proposal deadline one week later, there will undoubtedly be several months of elapsed time before movement occurs.

Against the backdrop of an impending US Presidential Election in November 2016, which will not only see some turnover in head count with a new cabinet to replace Barack Obama, but also a higher prioritization of resolving the United States – Cuba slot applications process, decisions for Haneda were placed on the back-burner.

With a temporary sanction to operate daytime flights into Haneda, U.S. carriers did everything they could to retain these slots – and then grow some, if possible. For the most part, the U.S. carriers were aligned on one common objective: try to obtain one, if not more, of the five daytime slots.

The sole exception to this rule, however, has been Hawaiian, which actually managed to convince the DOT that carriers would be required to specify whether they were applying for daytime or nighttime routes and to rank their preferences accordingly.

To that effect, Hawaiian designated a preference (the 3rd of 3 possible combinations) for one of the nighttime slots, which caused some people to speculate that this may have adversely affected its chances of getting a daytime slot.

Also critical to the DOT’s mission of insuring that the needs and interests of the applicant carriers were balanced was weighing the impact of partner carriers, from the Japanese side, that have also been granted a limited number of slots to launch new Haneda – U.S. flights.

The proposals from each carrier were conducted in an extensive manner, with each applicant (American, Delta, United and Hawaiian) publishing in-depth analyses justifying their business cases for receiving one or more of the precious slots. Some appeared stronger than others in terms of providing market forecast data to delineate where the strongest commercial advantages lie.

Others simply stated the obvious. American was particularly aggressive about submitting addendum signatures and case studies provided by U.S. airport authorities to strengthen its application. United, surprisingly (or perhaps not) hardly mentioned its joint venture partner All Nippon Airways in its proposal, nor did American Airlines with Japan Airlines, which may have ultimately resulted in losing out on opportunities.

Delta wagered its bets by cancelling, or threatening to cancel, service between LAX and Minneapolis to Narita, and won in the end.

Unsurprisingly, the airline that has taken advantage of this extra wiggle room has been Atlanta-based Delta, by far the most vocal about the disadvantage it faces in Japan lacking a local partner carrier, unlike United and American.

Delta contends that its Tokyo Narita hub is endangered without a local partner carrier, and given the enormous advantages that Haneda airport holds over Narita, several of its U.S. routes – Minneapolis/St. Paul has been isolated as a prospective casualty that will stand to lose a nonstop link to Tokyo Narita should Delta not get its way.

Obviously, such rhetoric creates considerable background noise in mid-tier markets like MSP where international links are few and local politicians will rally behind their hometown carrier over hot air.

Interestingly, though, Delta’s application to the DOT did not list Minneapolis/St. Paul – Tokyo Haneda as its choice market should it only receive 1 of the 6 available slots. Instead, Los Angeles – Tokyo Haneda is its preferred designee route in the worst case scenario, while LAX – Haneda + MSP – Haneda is its next choice.

Obviously, the most optimal scenario would be for the DOT to honor all three of Delta’s desired routes (LAX, MSP and Atlanta – Haneda).

This is reflected in a rather quiet, but abrupt decision in May 2016 when Delta removed its existing Los Angeles – Tokyo Narita flight from inventory effective October 28, 2016. Six days before, Delta had loaded its schedules for Los Angeles – Tokyo Haneda beginning October 29, 2016, utilizing daytime slot hours that had been temporarily awarded to incumbent U.S. carriers operating into HND airport.

There could be a multitude of reasons explaining the rationale for this decision, but strictly based on performance data, there aren’t too many differences between Delta’s two Los Angeles – Tokyo routes. For Q4 2015, per airline performance data, both routes averaged load factors above 84%, and yields were nearly identical with $0.01 variation.

LAX – HND obviously managed higher local load factors given that Haneda is a terminating point for Delta, but overall, Narita generated higher average fares, revenue per available seat mile (RASM).

Delta argues that Haneda airport is THE preferred airport in the region, and in its application to the DOT, compared Narita’s decline and popularity in favor of Haneda to London Gatwick’s gradual pull-down over the past few decades as London Heathrow has expanded. In Europe, for example, carriers with daytime Haneda slots have reduced or cancelled their operations to Narita.

This is a major oversimplification on Delta’s part given that 1) The comparison to Gatwick is far-fetched and 2) The declines at Narita have not been as dramatic as Delta asserts.

For starters, London’s airport system is split among multiple airports, and it has always been clear that Heathrow is the preferred airport for business traffic, while the rest are utilized for leisure, both long and short-haul flights. Secondly, even with the gradual opening of additional Haneda routes, most U.S. and Japanese carriers have maintained, if not grown, their presence between serving Narita airport over Haneda.

Even airlines like JAL and ANA, who have been provided the most access to Haneda, have opted to utilize these slots to fly medium-haul routes to Asia or long-haul routes to O&D-heavy markets such as Los Angeles, San Francisco, Honolulu and Europe. Traffic between the U.S. and Japan is far more connection-heavy than between London Heathrow and Tokyo, for example.

Finally, Delta threw its weight around by threating to pull its Minneapolis/St. Paul – Tokyo Haneda nonstop service should it not be granted further access to Haneda. The logic is counter intuitive given that most of the Minneapolis – Tokyo traffic is fifth freedom connecting traffic to beyond markets Delta offers from Narita (such as Singapore, Bangkok, Taipei, Manila and Shanghai) which will no longer be offered as valid connection opportunities with the route terminating at Haneda airport.

To this end, the DOT commented that the Minneapolis award was contingent upon Delta maintaining its commitment to the MSP-HND route, wherein any deviations will automatically terminate the route and the authority will be granted to a “backup” carrier, presumably American to DFW in this case.

Hawaiian’s “high-risk, high-reward” strategy ultimately prizes the carrier with the greatest access to all of the Haneda slots on its own metal

At first glance, many speculated that Hawaiian had committed a major folly for convincing the DOT that it would need to require applicants to specify desires for daytime or nighttime routes and to rank their preferences accordingly.

To that effect, Hawaiian designated a preference (the 3rd of 3 possible combinations) for one of the nighttime slots, which caused some people to speculate that this may have adversely affected its chances of getting a daytime slot.

In its application, Hawaiian ranked its preferences for Haneda slots as follows: 1). Daily nonstop Honolulu – Haneda flights utilizing one of the five daytime slots, 2). Alternating nonstop flights between Honolulu (4x weekly) and Kona (3x weekly) during the day, or 3). adhering to the same schedule division, except bidding for the one available nighttime slot.

To expedite decisions, and to fill a void where no other carrier showed interest, the DOT granted Hawaiian the nighttime slot in May 2016, its 3rd out of 3 options.

Hawaiian was still in the running for one of the five daytime slots, but presumably the carrier had locked itself into a situation where it is serving Tokyo from its Honolulu hub on a sub-daily basis.

Technically speaking, Hawaiian’s existing nighttime slot from Honolulu to Haneda was going to be converted to a daytime slot, which Hawaiian will be permitted to exercise during the temporary adjustment period through Winter 2017, but afterwards, four of its existing Honolulu weekly services would shift to Kona.

Hawaiian was given until January 29, 2017 to start the new nighttime service split between Kona/Honolulu and Tokyo Haneda, but it could launch the route as early as October 30, 2016. Even before the DOT announced its final decisions, Hawaiian opened reservations for its proposed Kona – Tokyo Haneda route on December 20, 2016.

Now, Hawaiian will be able to augment its Haneda service by an additional seven weekly frequencies since it was granted a right to the daytime slot at Haneda. Hawaiian contended that multi-daily service to Haneda is merited given that 1 in 4 Japanese traveler heading to the United States is bound for Hawaii.

However, Hawaiian is, by no means, absent in Japan. In addition to its Haneda service, it flies to Osaka and Sapporo, and will be launching Tokyo Narita on July 22.

And then there were two: American and United walk away with the fewest frequencies to Haneda, but will gain from their Joint Venture partners

American and United were each granted one daytime slot apiece from Los Angeles and San Francisco to Haneda. Each had submitted a total of 2 bids, with American requesting access from LAX and its DFW hub, and United requesting for permission from SFO and its Newark hub.

Effectively, the US DOT simply granted the two carriers the ability to move their existing nighttime slots to daytime slots. One of the largest grievances that Delta has raised is how Haneda airport is a predominantly Star Alliance hub.

With ANA holding the largest concentration of landing rights at Haneda, which in effect, gives United Airlines an advantage, the odds did not favor United receiving an additional flight from the U.S.

Furthermore, ANA received approval to convert 1 of its 2 daily services from Tokyo to New York JFK and Chicago O’Hare from Narita service to Haneda service, both of which will become daytime flights.

ANA was also able to successfully move its existing services from Los Angeles and Honolulu to Tokyo Haneda from nighttime arrival and departure slots to daytime slots. The Honolulu departure will move to early-afternoon hours, instead of evening hours, while arrivals into Haneda will be during evening hours, instead of night-time.

Japan Airlines, meanwhile, was able to shift its Tokyo Haneda – Honolulu and San Francisco flight times around as well.  Its departure time from Tokyo to SFO will move to evening hours instead of midnight, and its San Francisco arrival/departure will move to noon/afternoon hours.

Overall, the adjustments on the oneworld and Star Alliance sides of the coin will remain net-neutral on US – Tokyo capacity and frequency.

The focus will remain on Delta and Hawaiian moving forward

Ultimately, Hawaiian walked away from the situation was the clearest victor, while Delta will be under intense scrutiny to see if it can hold itself accountable to the premise that the future of its Minneapolis – Tokyo route depended entirely on a Haneda link.

Given the carriers’ tenuous history in trying to pull various stunts between Tokyo Haneda and Seattle, a much larger local market than Minneapolis – Tokyo, there remains a lot of skepticism over whether Delta will stay true to its claims.

What we do know is that the roster of US markets that will now have nonstop links to Haneda will effectively grow from three (SFO, LAX, HNL) to seven (+ KOA, ORD, MSP, JFK) this fall. Given the constraints the DOT is under, and the considerable amount of noise present in the often ambiguous states that airlines present their cases to get what they want, the DOT has to be commended for finally giving Hawaiian a chance to prove its worth.