A key advisor to the Japanese Prime Minister has suggested that All Nippon Airways (ANA) and Japan Airlines (JAL) should merge. Make no mistake: this would be horrible for Japanese consumers and indeed consumers around the world.
Influential Government Advisor Says ANA + JAL Should Merge
Heizo Takenaka, an economist and advisor on Prime Minister Yoshihide Suga’s Growth Strategy Council, told Bloomberg that Japan will need to inject capital into both airlines and that the two carriers should “become one.”
Here is a snippet of an English-language article on the Japan Airlines-ANA merger suggestion coming from an adviser to the Japanese PM. Now go subscribe to a Bloomberg @business… Terminal 🤑🤑🤑 https://t.co/hloJhnhCq4 pic.twitter.com/7KMW3k9ZDb
— G-DLEE AVIATION 2020 (@JournoDannyAero) November 24, 2020
Shares of both ANA and JAL surged on news of Takenaka’s statement.
View from the Wing reasons that keeping airlines afloat with government funds and competing with each other is counterproductive.
The need for subsidies implies the need for consolidation, otherwise airlines are just burning through the subsidies competing for limited passenger business at a loss.
He’s right…but I also think that analysis is short-sighted.
Airline Mergers Are Bad For Consumers. Always.
We tend to let our guard down during period of rapid change, like the pandemic era we currently find ourselves in. We must not do that.
Think what an ANA – JAL merger could eventually mean for consumers. Higher prices. Reduced flight schedules and onboard service. A less valuable loyalty program. Most importantly, ANA and JAL have spurred each other to be great. Without that competitive pressure, innovation would likely stagnate. Pricing pressure may still exist from budget airlines, but that would make the merged carrier much more likely to match service levels on budget airlines.
Sometimes mergers are necessary for survival. Were they necessary in the USA? I tend to think not, at least not all of them. And why should I have a say in this as a private citizen? Because my tax dollars were used to bail airlines out after 9/11 and again during the current pandemic.
Japanese taxpayers should push back against a merger now. This is a horrible time for aviation around the world and Japan is certainly not exempt. But with a vaccine coming shortly and a better understanding overall of COVID-19, there is no reason to think that the current environment will become a permanent normal.
Japan must not be short-sighted in its push to merge JAL and ANA. The danger is not on a short-term basis, but in 2-3 years when demand returns to 2019 levels, but Japanese consumers find themselves suddenly with less choice, less service, less perks, and higher prices on a carrier they bailed out. Both JAL and ANA were profitable before the pandemic. I see no reason to think they cannot emerge from the pandemic and achieve profitability once again.
image: Sho233531 / Wikimedia Commons