In a scenario that is all too common to us here in Minnesota, it has recently been reported that Northwest Airlines has duped the local government and taxpayers in Osaka, Japan into giving the airline money for promises that the airline wouldn't keep... :down:
http://www.yomiuri.co.jp/dy/national/20060919TDY03001.htm
Airlines pocketing tax-funded incentives
The Yomiuri Shimbun
An association promoting Kansai Airport paid a total of about 30 million yen in incentives for new flights to two U.S. airline companies, that have since decided to withdraw the services after just one year, it has been learned.
The association of local governments and business organizations is to provide a further 25 million yen to the firms under its incentive program--partly funded by taxpayers' money.
The association has no mechanism for recouping incentives, nor can it refuse to pay the next installment.
The Osaka prefectural government, which serves as the secretariat of the association, is to reexamine the program stating that the flights' withdrawal after such a short period is unexpected, and paying further incentives to the two firms will be criticized as a waste of taxpayers' money.
The association established the program in April last year to encourage airline companies to operate from the airport, which is to open its second runway in August.
Incentives are paid to airline companies for two years--up to 60 million yen in the first year and up to 30 million yen in the second year--when they establish new international flights, depending on their frequency.
Airline companies that launch flights to and from the airport are given 10 million yen. If flights are increased, an extra 5 million yen to 15 million yen is paid to help cover publicity costs.
The program partly intends to compensate airlines for the airport's landing fees, often criticized for being the world's most expensive.
The program's first incentive was paid to Qatar Airways, which launched flights in April last year. About 79 million yen has since been paid to six firms for launching a total of seven flights. The six include American Airlines and Northwest Airlines, each due to withdraw a flight.
According to the association and Kansai International Airport Co., American Airlines launched flights to Dallas in November, receiving 10 million yen in new flight incentives and about 9 million yen in basic incentives for its operations until March 25, 2006.
However, citing profit deterioration caused by rising fuel costs, the company has decided to withdraw the flight from Oct. 29.
Northwest Airlines, which received about 11 million yen in basic incentives from launching flights to Saipan in October, will discontinue the service from Oct. 29.
As the incentive program does not stipulate how long a particular service should operate, the association cannot request repayments of the incentives. Further, it cannot withhold the next payment of about 25 million yen for the period from March 26 to Oct. 28.
The two companies have not offered to return the incentives, nor have they waived the next installment.
The association was set up in 1998 and comprises about 300 local governments and organizations.
According to the association's budget for this fiscal year, nine prefectures, including Osaka Prefecture and four major cities including Osaka, have shared payments of about 550 million yen.
Firms belonging to the Kansai Economic Federation and the Osaka Chamber of Commerce and Industry have paid a total of 150 million yen.
An Osaka prefectural government official said: "It's difficult to set terms [for the program] because incentives aren't like contract payments, they're more like cash contributions. If we extend the period over which incentives are paid out, this reduces the amount each time and makes the program less attractive. We need to think of a measure to avoid being criticized for losing money to airline companies."
http://www.yomiuri.co.jp/dy/national/20060919TDY03001.htm
Airlines pocketing tax-funded incentives
The Yomiuri Shimbun
An association promoting Kansai Airport paid a total of about 30 million yen in incentives for new flights to two U.S. airline companies, that have since decided to withdraw the services after just one year, it has been learned.
The association of local governments and business organizations is to provide a further 25 million yen to the firms under its incentive program--partly funded by taxpayers' money.
The association has no mechanism for recouping incentives, nor can it refuse to pay the next installment.
The Osaka prefectural government, which serves as the secretariat of the association, is to reexamine the program stating that the flights' withdrawal after such a short period is unexpected, and paying further incentives to the two firms will be criticized as a waste of taxpayers' money.
The association established the program in April last year to encourage airline companies to operate from the airport, which is to open its second runway in August.
Incentives are paid to airline companies for two years--up to 60 million yen in the first year and up to 30 million yen in the second year--when they establish new international flights, depending on their frequency.
Airline companies that launch flights to and from the airport are given 10 million yen. If flights are increased, an extra 5 million yen to 15 million yen is paid to help cover publicity costs.
The program partly intends to compensate airlines for the airport's landing fees, often criticized for being the world's most expensive.
The program's first incentive was paid to Qatar Airways, which launched flights in April last year. About 79 million yen has since been paid to six firms for launching a total of seven flights. The six include American Airlines and Northwest Airlines, each due to withdraw a flight.
According to the association and Kansai International Airport Co., American Airlines launched flights to Dallas in November, receiving 10 million yen in new flight incentives and about 9 million yen in basic incentives for its operations until March 25, 2006.
However, citing profit deterioration caused by rising fuel costs, the company has decided to withdraw the flight from Oct. 29.
Northwest Airlines, which received about 11 million yen in basic incentives from launching flights to Saipan in October, will discontinue the service from Oct. 29.
As the incentive program does not stipulate how long a particular service should operate, the association cannot request repayments of the incentives. Further, it cannot withhold the next payment of about 25 million yen for the period from March 26 to Oct. 28.
The two companies have not offered to return the incentives, nor have they waived the next installment.
The association was set up in 1998 and comprises about 300 local governments and organizations.
According to the association's budget for this fiscal year, nine prefectures, including Osaka Prefecture and four major cities including Osaka, have shared payments of about 550 million yen.
Firms belonging to the Kansai Economic Federation and the Osaka Chamber of Commerce and Industry have paid a total of 150 million yen.
An Osaka prefectural government official said: "It's difficult to set terms [for the program] because incentives aren't like contract payments, they're more like cash contributions. If we extend the period over which incentives are paid out, this reduces the amount each time and makes the program less attractive. We need to think of a measure to avoid being criticized for losing money to airline companies."
