Airfare band system
This system allows airlines to set domestic airfares freely within a set range. The upper limit is the standard cost, worked out by adding an adequate return for capitals to the average expenses needed to operate the service. The introduction of this system was decided at the Ministerial Council on Economic Affairs in September 1995, and a 25% band of airfares was implemented in May 1996. This has allowed each airline company to set airfares freely, according to customer demand. The new fare setting method is believed to have encouraged airlines to streamline their management (the yardstick effect). Standard cost is based on the actual costs of some routes serviced by multiple companies. In other words, it is determined in a competitive environment. The system also has a high level of transparency, with its calculation formula disclosed to the public. This air fare regulation is planned to be replaced by a more liberalised regulation in 2000.
Introduction of double- and triple-trackings: services by multiple airlines
The double- and triple-track system was introduced in 1986, allowing companies to enter new business areas and flight routes. Until 1985, the Japanese aviation industry maintained the so-called 45-47 system, based on a Cabinet decision of 1970 and implemented by an executive order from the Minister of Transport in 1972. This system, designed to prevent excessive industry competition, assigned three major carriers to separate business areas (international and domestic trunk routes for Japan Air Lines, domestic routes for All Nippon Airways, and local and some domestic trunk routes for Toa Domestic Airlines). The double- and triple-track system, introduced to encourage competition, allows two or three companies to service the same domestic route. This system applies to routes where annual passengers exceed a set level. The number of double-track routes had increased from 3 to 22, and triple-track routes from 7 to 29 as of 1996.