U.S. Airlines Go Head To Head Over New China Flights

<B>U.S. Airlines Go Head To Head Over New China Flights</B>

By Maria Lenhart

In the wake of the new trade agreement with China, which likely will spark demand for more transpacific passenger and cargo capacity, a half dozen air carriers are competing aggressively for rights to offer 10 new flights to China from U.S. gateways. With a decision expected by the end of summer, the U.S. Department of Transportation is reviewing applications from airlines that include American, Delta, Northwest and United. Depending on the outcome, American or Delta could make their first entrance into China, gaining a toehold in a market now dominated by United and Northwest. At the same time, all four of these airlines also are competing against cargo carriers UPS and Polar Air.

A U.S.-China aviation agreement reached last year, which already has awarded 17 new weekly flights to Northwest, United and Federal Express, allows a new U.S. carrier to enter the market in April 2001 and adds 10 weekly flights among the U.S. carriers then able to serve the market. Both American and Delta have applied for all 10 of the new flights. American proposes operating nonstop service from Chicago to Shanghai and Beijing, using Boeing B777 aircraft that would carry 220 passengers. Beginning April 1, 2001, American hopes to offer daily service to Shanghai and thrice weekly service to Beijing. If awarded the rights, Delta plans to offer nonstop daily service between New York and Beijing and thrice weekly nonstop Cincinnati-Beijing service, continuing onto Shanghai. The flights would use Boeing 777 aircraft and originate in Atlanta, with connections in the Southeast. In its application to DOT, Delta cited "a critical gap" in service to China from cities in the eastern United States.

In putting forth its case before DOT, American said its entrance into the market would bring more competition that would break "the United and Northwest duopoloy." The application also deplored the fact "that only two U.S. passenger airlines now serve the fastest-growing market in the world. Only 25 passenger flights a week connect the U.S. and China, compared with 421 between the U.S. and Japan, a much smaller market." The airline also argued the routes should go to a passenger carrier because "U.S.-China travel and trade will expand dramatically in the next decade. Awarding precious air routes to a cargo-only carrier will do absolutely nothing to meet the air service demands of travelers."

United Airlines is applying for the right to offer two more weekly flights between Shanghai and San Francisco, a route that it currently flies five times a week. The airline also inaugurated new daily service between Beijing and San Francisco in June, bringing its total number of flights between China and San Francisco to 15 per week.

United next April plans to inaugurate daily service between Shanghai and Chicago, exercising approval already granted from DOT. The new service, which could put a damper on American's pending application to also offer daily flights on that route, will be on Boeing 747-400 aircraft configured with 368 seats.

Northwest, which already offers 15 flights a week to Shanghai and Beijing, has applied for five new frequencies to begin in April 2001. The airline is asking for two new all-cargo flights between the United States and Shanghai, one new nonstop combination passenger-cargo flight between Detroit and Shanghai and two new flights between Tokyo's Narita Airport and Shanghai and Beijing.

In its most recent expansion into the China market, Northwest inaugurated twice weekly service between Shanghai and Detroit in April. The Shanghai-Detroit nonstop, which uses Boeing 747-400 aircraft, takes 13 hours and 35 minutes, three hours less than Northwest's other service to Shanghai from Detroit, which stops in Tokyo. The new flights are the only nonstop service currently provided to Shanghai from any city west of the Rocky Mountains.

According to Northwest spokesman Doug Killian, the new Detroit service is designed not only to serve passengers in the Midwest, but also is scheduled to connect with many flights from Florida and other points in the Southeast. "It means a big savings in time from flying to China from gateways on the West Coast," he said.

Demand for service to Shanghai is coming primarily from the corporate market, Killian added. "China is positioning Shanghai as an industrial capital and U.S. companies are expanding there everyday," he said. While hoping to expand its passenger service to China, Killian said Northwest is more interested in expanding its cargo capacity there. "Right now, there is actually plenty of passenger capacity in the market, there are more seats than passengers," he said. "The real need is for more cargo service."

Although passenger service to China from the United States lags far behind service to Japan and other Asian destinations, Killian said such comparisons should not be made. "The Chinese economy, while growing, is still only where the Japanese economy was about 25 years ago," he said. "Plus, you still have the fact that the Chinese cannot travel outside of China. China has tremendous potential, but the travel base is still limited.