Phoenix - As much as
Air China would like to develop a deeper relationship with its U.S.-based Star
Alliance partners, the possibility of forging an antitrust-immune joint venture
remains a distant one.
"Obviously, a joint
venture is predicated upon antitrust immunity, and antitrust immunity is
predicated upon Open Skies," Air China vice president and general manager
of North America Zhihang Chi told attendees here at the Phoenix Sky Harbor International Aviation Symposium this month. While Chi cited as a key barrier visa issues
between the two countries, others have pointed to a protectionist stance taken
by the Chinese government in allocating to U.S. carriers takeoff and landing
slots at Chinese airports.
"Why is there not
going to be Open Skies?" Chi asked. "Because we don't need it. Today,
we have so many unused frequencies, and obviously that's a whole ball of wax.
The reason we have so many unused frequencies is because we cannot get visas
for Chinese folks, so they can't travel to this country."
Chi claimed the United
States is the most desired destination for Chinese travelers, but China is not included
in the U.S. Visa Waiver Program, which allows U.S. visitation for 90 days
without a visa. "Without any visa liberalization, we don't have enough
passengers to fill our airplanes," Chi said.
During a live poll of
nearly 100 aviation professionals attending the symposium, 47 percent expected
within 10 years the completion of an Open Skies pact between the United States
and China. Others were less optimistic.
Session moderator and
former U.S. State Department deputy assistant secretary of transportation affairs
John Byerly, who prior to his retirement last year played a role in negotiating
many of the roughly 100 U.S. Open Skies agreements, pointed to the difficulty
in attaining a deal with China. "One smart decision when I was leading
negotiations in the State Department was I delegated the Chinese negotiations
in every case to someone else," he joked in an exchange with Chi.
"You're too tough."
On the contentious issue
of U.S. airline slot access to Chinese airports, Byerly in an email to BTN wrote: "China has given no sign
of being interested, in the near term, of moving to an Open Skies agreement,
citing the fact that Chinese air carriers have ample frequencies in the
existing 2007 agreement to expand their services. Chinese representatives have
repeated long-standing criticisms of U.S. visa policy as a barrier to
competitive equality, a view that the U.S. government does not share. In the
next year or two, the biggest challenge for U.S. airlines is more about
obtaining commercially viable slots for the frequencies they already possess
than about gaining new frequencies."
The slot issue last year
was exemplified by the troubles American Airlines had in launching its first flight from Chicago to Beijing.
disagreements now is a task for Byerly's successor, Kris Urs. During the
Phoenix symposium, Urs told attendees he expects to sit down with his Chinese
counterparts in August "to discuss our civil aviation relationship."
"When we look at
the passengers who depart the United States each year, about 70 percent now go
to Open Skies partners," Urs said. "Still, 30 percent goes to
non-Open Skies partners."
Representing the largest
chunks of that 30 percent are Mexico and the Dominican Republic. Urs noted that
the United States also has no Open Skies deals with Russia—"one of the
large, emerging economies that some day we might like to get" signed
up—and South Africa. China rounds out the five biggest markets without U.S.
Open Skies deals.
"We hit 100
agreements, but we hit 100 agreements in 18 years," Urs said. "There
are still a significant number of countries that are candidates out there.
We're open to all takers."
meantime, the largest global alliances have bulked up their Chinese presence.
For example, Taiwan's China Airlines and Shanghai-based China Eastern last year
agreed to join SkyTeam, whose members also include Guangzhou-based China Southern. Oneworld
members, meanwhile, include Hong Kong's Cathay Pacific and its sister airline Dragonair.
Those carriers can go
only so far with their U.S. partners, Air China's Chi noted. "This
alliance thing is probably the funniest, weirdest creature that there ever is,"
he said. "If I'm comparing alliances to a relationship, we can look, we
can touch and we can probably go even further than that, but we can't talk"—at
least in the absence of antitrust immunity.
alliances, we compete," he continued. "We don't have antitrust
immunity. If we don't compete, we literally go to jail. That's for real. Our
best partner is also our worst competitor. In our experience in the United
States, we compete head-on with United."