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Wednesday, Nov. 15, 2000

Costly Kansai airport plagued by pullouts, rivals, debts, sea


Staff writer

OSAKA -- Six years after opening, Kansai International Airport is struggling to stay above water -- literally and figuratively.

The airport's problems range from a sinking passenger terminal and mounting debts due to decreased usage, to criticism of the airport's high costs and threats to postpone construction of a planned second runway.

Earlier this month, officials of Kansai International Airport Corp., the operator, and the Osaka Prefectural Government visited Tokyo to appeal for central government assistance for the troubled facility, which has over 1 trillion yen in outstanding loans that must be repaid with interest.

While no specific amount of aid was requested, it comes in addition to a 120 billion yen budget request for fiscal 2001 that the Transport Ministry is seeking for second-phase construction, slated to be completed in 2007.

But with the cost of the second-phase construction estimated at 1.5 trillion yen, the Finance Ministry, among other entities, is showing reluctance to allow such a massive state expenditure.

Finance Minister Kiichi Miyazawa is demanding that the Osaka government and business community bear an increased burden of the debt. Only by shouldering the extra burden and fundamentally changing the management structure will the central government provide assistance, he said.

Miyazawa added, however, that although his ministry is not thinking about canceling the construction, it will be risky to continue under the current financial arrangements.

Despite Miyazawa's statement, there are those in and outside of Japan calling for a reassessment of the need for a second runway, stirring anxiety among KIAC officials and the local business community over a halt in funding and a delay in the construction.

"There is no merit to delaying the second-phase construction," KIAC President Kiyoyasu Mikanagi said last Thursday. "This project is necessary not just for the Kansai region but also for Japan."

In addition, worried that they will be forced to bear the additional costs and concerned about the airport's safety, foreign airlines are protesting the plans.

In late October, the Foreign Airline Association in Japan, which consists of 46 foreign carriers serving Japanese airports, issued a report that strongly opposed the second-phase construction.

"Kansai International Airport has the highest landing fees in the world. Our report makes it clear that some airlines would pull out of Kansai airport and use Narita airport if landing slots became available," FAAJ spokesman Atsukuni Sakamoto said.

The FAAJ cited several reasons for its opposition. First, it noted that Kansai airport is underutilized. It agrees with a recent International Air Transport Association report that opposes another runway and advised it would be better to use the first one more effectively and extend the existing terminal rather than build a new one.

More serious is that the airport is deeply in the red, which the FAAJ fears will mean higher usage fees levied against the airlines if the second-phase construction goes through.

Landing fees at Kansai International Airport are nearly $10,000 for a Boeing 747. That's twice what the new airport at Hong Kong charges and between three and five times more than other Asian airports charge.

The FAAJ also noted the sinkage problem and warns that the second runway's island, which will be built in even deeper water than the first, is likely to sink just like the first. The soft seabed makes building another island unsuitable, the FAAJ report says.

To halt the sinkage, airport officials announced plans to build a concrete wall around the passenger terminal. The idea is that pressure from the sea will squeeze the wall, which will, in turn, compress the soft landfill under the building and slow the rate of sinkage. But the plan is expected to cost at least 20 billion yen, and airport officials say they cannot guarantee it will work.

Local governments and businesses reacted angrily to the FAAJ report. Akio Nomura, president of Osaka Gas Co., said foreigners had no business criticizing the project.

"It's not a problem to be pointed out by foreign airlines," Nomura reckoned.

Other Osaka leaders say that, with the opening of the Universal Studios Japan theme park next year, demand for air travel to Kansai airport will rise. But they offered no evidence to back up their claims.

After 2005, Itami airport north of Osaka, and Kobe airport, which is currently under construction, are expected to handle most traffic to the new theme park; the Kansai airport handles very few domestic flights.

KIAC officials announced last week that they had revised their future projections of airport use and profitability. Offering three potential scenarios, KIAC President Mikanagi said that if user demand grew by 3.5 percent a year from 2001, the airport would reach its maximum capacity of 160,000 takeoffs and landings per year by 2006.

Based on this estimate, Mikanagi said the airport would begin to turn profits in 2012 and clear its debts by 2024.

Under the second scenario, which KIAC officials consider the most likely, user demand will grow by 2.6 percent yearly from 2001, capacity will be reached by 2006, profitability will begin from 2017 and debts will disappear by 2030.

The third scenario presumes 2.2 percent growth, maximum capacity by 2007, profitability in 2020 and no debts by 2037.

But neither Mikanagi nor the KIAC offered evidence that such growth rates would be met. With nearly a dozen foreign airlines having canceled or curtailed services to Kansai airport since 1998, FAAJ and other critics say such speculation is overly optimistic.



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