The future of Japan's Narita Airport

Long-life assets such as airports have traditionally lent themselves to master plans with 20-year-plus projections. However, in airports such as Narita, conflicting changes in economics, demographics, government policy, and technology even in a five-to-ten-year period have made forecasting even more difficult.

Background

When Narita Airport opened in 1978, Japan’s GDP was four times higher than China and Korea combined. Air routes in North Asia focused on Japan as a destination, as well as a transit stop at Narita for flights between Asia and North America.

Since then social economic, political and technological changes have had a significant impact on the role of Narita Airport. These changes include:

Economic growth of surrounding Asian countries - Increased wealth has resulted in cities such as Seoul becoming destinations in themselves, with sufficient demand to justify direct flights from North America rather than indirect flights via Narita. In October 2016 alone, Delta ended Narita services from New York and through services to Osaka and Bangkok (Mayerowitz, 2016). This can be contrasted with 1978, when more than 80% of traffic from the US to Asia involved a stop in Narita (Feldhoff, 2003).

Easing of visa restrictions since 2014 has also contributed to reversing Japan’s status from an outbound to an inbound tourism market. The Japan National Tourism Office (JNTO) and the Japanese Ministry of Justice Statistics show that in the period from 2013 to 2018, foreign arrivals into Japan increased from 10M to 31M, while Japanese departures increased at much smaller rate, from 17M to 19M in the same period.

Terminals that were built with light security for outbound Japanese in the 1980s must now cope with more intensive immigration processing for inbound foreigners post-9/11/2001.

Low oil prices since 2015 and smaller, ultra-efficient aircraft such as the B787 and A350 made “hub-busting” services feasible. Singapore Airlines and United Airlines now fly direct from Singapore to America, replacing services via Narita (Park & Bachman, 2016).

Opening of the Low Cost Carriers (LCC) market in Narita in 2011. Compared with the inter-continental planes they displaced, these LCCs carry origin-destination rather than transfer traffic have reduced dwell time, less/fewer check-in luggage requirements, and a smaller terminal and runway footprint.

The re-opening of Haneda as an international airport in 2010 meant that Narita lost its monopoly on international traffic and was forced to look for ways to attract traffic, though the lack of slots at Haneda had limited the extent of competition. 

Changing nature of airline alliances.  After the Delta’s failed attempt to acquire a stake in Japan Airlines, it turned to strengthening its partnership with Korean Air through the Skyteam network, and reducing its requirement to use Tokyo for connecting traffic.  The airlines that continue using Tokyo as a hub are JAL and ANA, whose significant domestic feeder traffic largely connects at Haneda.  

The transformation of Narita

The following statistics from Narita Airport Corporation illustrate the transformation of airport use:

                                              2013                2018            %

Aircraft Movements           212K                255K           20%

Fuel Supplied (M KL)            4.77                 4.43          -7%

Passengers

Japanese                               19.1M             14.2M          -25%

Non Japanese                         8.8M              17.4M          98%

Transit                                     5.6M               3.7M          -34%

Domestic                                4.8M                7.3M           51%

The increase in aircraft movements were due to an increase in narrow body short haul traffic (LCCs both domestically and to nearby Asian cities), offsetting a decrease in wide body long haul traffic as foreign carriers reduced their Narita transit operations. This, combined with more fuel efficient aircraft, led to a reduction in fuel use. Changes in passenger numbers also reflect these trends, with an increase in non-Japanese passengers aided by a relaxation of visa requirements from selected Asian countries.

Historically, Narita had the highest landing fees in the world. Park (2003) showed landing fees were double that of Hong Kong.

Leveraging the LCC boom, Narita Airport terminal 3 opened as an incremental investment, with the option to expand. Combined with a decision to halve or waive landing fees for new entrants, it captured the majority of LCC traffic in the Tokyo metropolitan area.

Furthermore, the future may be different in a way that cannot be revealed by projecting past trends. Charles et al. (2007) described a new development where airports become cities in their own right. This has occurred with commercial land near Schiphol being more expensive than land closer to the city due to its convenience to the airport. Because Narita is surrounded by land with relatively low population density (compared with some other airports in Asia), it has the potential to expand and derive more land-side revenues to offset its high air-side costs.

Charles et al. (2007) also discussed the risk of cyber-attack and disaster recovery. Having Haneda as a backup airport connected by a fast-speed magnetic levitation train will increase the up-time and competitive advantage of both airports. While this connection will result in one virtual airport, it needs to protect its advantage with competitive pricing.

In contrast, Martín and Voltes-Dorta (2011) showed that consolidating into a single hub resulted in higher returns than growing a coordinated multi-airport system. Although constraints prevent the closure of either Haneda or Narita into a single airport, a compromise is possible. In Sydney it was proposed to consolidate Qantas domestic and international flights from two terminals into one. This would allow ease of transfer while freeing the other terminals for other airlines. Narita did this by co-locating Jetstar domestic and international services in the same terminal.

Other considerations and limitations

Some other considerations that may help Narita Airport in the future include:

Stakeholder management: Narita’s inefficient design is not entirely due to lack of planning, dynamic or otherwise. There were plans for a longer second runway; however, insufficient consultation created resistance to further expansion. Second, Narita should lobby nearby Yokota airbase for more flexible airspace arrangements. (Otake, 2015).

“Fit for competition”:  An airport can only take advantage of opportunities revealed by dynamic planning if it is “fit to compete”. Using a football analogy, an unfit player may not be able to run fast enough to score a goal. In Narita’s case, its high debt, resulting from construction cost blow outs, as well as an overly complex management structure involving all levels of government and the airport authority, means that it is too slow and bloated to compete against its rivals. Landing fees at Chubu are 30% less than Narita. Second the separation of domestic and international traffic between Narita and Haneda makes it harder for airlines to compete with bullet trains with short haul travel. For distances less than 500 km, it is often quicker to catch a bullet train than to spend 90 minutes transferring from Narita to Haneda for a connecting domestic flight. The bullet train companies are aware of this and have expanded their network to Kyushu and Kanazawa in the last ten years to take advantage of Narita’s inconvenient position.

Conclusion

While Narita has learnt to be more dynamic in its planning with the LCCs, historical limitations have made it harder to take advantage of opportunities. At the same time, Narita has demonstrated that careful stakeholder management and fitness to compete is important in airport success.

References 

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Charles, Michael B., Barnes, Paul H., Ryan, Neal, & Clayton, Julia J. (2007). Airport Futures: Towards a critique of the Aerotropolis model.  Futures, 39, 1009–1028

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JNTO - Japan National Tourism Office (2019) - Japan Foreign Visitors & Japanese Departures – Japan Ministry of Justice https://www.jnto.go.jp/eng/ttp/sta/

Narita Airport Corporation (2019) – Narita Airport Traffic Statistics.  https://www.naa.jp/en/airport/pdf/statistics1978-2018.pdf

Martín, J. C., & Voltes-Dorta, A. (2011). The dilemma between capacity expansions and multi-airport systems: Empirical evidence from the industry’s cost function. Transportation Research Part E, 47(3), 382-389

Mayerowitz, S (2016) Delta and Korean Air rekindle a partnership grown frosty. Japan Today. Retrieved from: https://www.japantoday.com/category/travel/view/delta-and-korean-air-rekindle-a-partnership-grown-frosty

Otake, T. (2015). Sandwiched between Yokota, Narita airspace, ever-busy Haneda looks to route some flights over metropolis. Japan Times. Retrieved from http://www.japantimes.co.jp/news/2015/04/10/national/sandwiched-yokota-narita-airspace-ever-busy-haneda-looks-route-flights-metropolis/#.V9ze1yh97SE

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Park, K, and Bachman, J. (2016) Singapore Air to Challenge United With Nonstop U.S. Flights. Bloomberg. Retrieved from http://www.bloomberg.com/news/articles/2016-06-15/united-to-have-only-u-s-singapore-nonstop-for-just-four-months