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EXCLUSIVE-JAL may take legal action against govt over landing slots

Tim Kelly, William Mallard and Kentaro Sugiyama
Thursday, 24 Oct 2013 | 7:01 AM ET

* JAL chief says lawsuit vs govt possible over landing slots

* Legal action would be unprecedented for Japan airline industry

* Worries on being a launch customer contributed to choosing Airbus over Boeing

(Adds context, comments from CEO)

TOKYO, Oct 24 (Reuters) - Japan Airlines reserves the right to sue the government for favouring rival ANA Holdings in allocating landing slots, its president told Reuters on Thursday, raising the prospect of an unprecedented battle that could batter the nation's airline industry.

Asking a court to force the government to review its recent allocation would be a rare step for a Japanese company, especially from one that enjoyed cozy ties to politicians and regulators but which has fallen out of favour of Prime Minister Shinzo Abe's one-year-old administration.

"It's one of the steps we might take in the future," JAL President Yoshiharu Ueki said, when asked if legal action was one possibility.

Ueki said his company had asked the government to give a satisfactory explanation for the landing-rights handout, which saw Japan's biggest airline ANA receive more than twice as many of the prized international slots at Haneda airport, the world's fourth busiest hub.

JAL is Japan's second-biggest airline by revenue and fleet size.

The government, which had previously divided slots equally between the two airlines, is expected to respond to JAL as soon as Friday, but Ueki said he was extremely dissatisfied with the process so far.

"There are times when you will take actions because you are trying to achieve a particular result, and sometimes you will take actions even knowing that you might not be able to get a particular result," Ueki said.

"Sometimes things have to be said, sometimes things have to be done," he told Reuters during an interview at JAL's headquarters, which overlooks Tokyo Bay.

PROTEST

In what became a politically charged battle over the landing rights at the Tokyo hub, Japan's aviation regulators on Oct. 2 awarded JAL five new Haneda slots compared with 11 for ANA.

Two days later, JAL filed its first ever formal request for the government to clarify its rationale for the allocation of the slots, which are worth around $20 million a year in operating profit. Once handed out, landing rights typically remain with Japanese airlines as long as they stay in business.

Aviation officials argued that they needed to level the playing field for the airlines after a $3.5 billion state-led bailout waived most of JAL's debt and gave it a competitive advantage over ANA.

ANA lobbied hard for a bigger share of landing rights, winning the sympathy of Abe's ruling Liberal Democratic Party, which was in opposition when JAL was rescued.

Ueki said the government's decision, in practice, restricts JAL from opening new routes, and the uncertainty was preventing the airline from planning its flight schedule for next summer and hindering its mid- to long-term business plan.

"We weren't informed of the restrictions, nor were they discussed with us," Ueki said.

The ruling, he said, was opaque, irrational and vague enough that it could apply to other airports.

SPURNING BOEING

Ueki, the first commercial pilot to steer the carrier as president, has spearheaded several unconventional decisions by JAL since he took over as CEO in February 2012.

This month, JAL for the first time spurned Boeing Co, which has dominated the Japanese market for decades, in favour of 31 A350 jets from rival Airbus..

JAL and ANA have traditionally bought from the U.S. manufacturer in what was seen as essentially an extension of the close U.S.-Japan security alliance.

"I don't think I broke any taboo," Ueki said, with a model of an A350 in JAL colours displayed in his meeting room.

JAL went with the European maker, Ueki said, in part because it was worried about the risk of being a launch customer for new aircraft, a commitment it would have had to make had it opted to pick the Boeing 777X.

JAL did not switch to Airbus, however, because of the delivery delays to Boeing's 787 Dreamliner and the technical faults which grounded the aircraft, he said.

JAL's fleet planning, he said, would turn next to replacing its older Boeing 737 jets. The carrier, which owns 30 of the single-aisle aircraft, will consider proposals from both Boeing and Airbus, Ueki said.

"We have some 200 aircraft, so that means every year we have around 11 aircraft that we need to replace," he said.

(Editing by Edmund Klamann and Miral Fahmy)

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