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Airlines Join Dispute For China Route Authority

By Jay Boehmer / October 08, 2006 / Contact Reporter
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American, Continental, Northwest and United airlines in the past month intensified campaigns to secure nonstop route authority between the United States and China. The U.S. Department of Transportation this year is expected to allocate one slot to a carrier to launch service in 2007.

The four airlines boosted efforts in the past month through lobbying campaigns, Web sites in support of their applications and petitions that show governmental and corporate backing for their route proposals. American is seeking service between its Dallas/Fort Worth hub to Beijing, Continental is asking authorities for a Newark-Shanghai route, Northwest has filed for authority to fly between Detroit and Shanghai, and United is requesting approval to launch service between Washington Dulles and Beijing.

"China restricts flights into the country from abroad, thus making the competition heated," according to a research note written by Calyon Securities airline analyst Ray Neidl last week. "This year, the Department of Transportation will allow one U.S. airline to add a route to China starting in March. Each of the four airlines has applications submitted with the DOT, and each has made arguments explaining why it should receive the route."

In addition to noting economic benefits to various state and cities that host airports, carriers each have noted a litany of reasons for DOT to grant them approval, while also sharing with DOT tens of thousands of signatures apiece supporting respective cases.

American Airlines is seeking to serve the Dallas/Fort Worth-Beijing route with a three-class-configured Boeing 777, projecting it would carry more than 144,000 passengers in its first year. If approved, the carrier said it would create "the first gateway to China from the southern United States and will provide one-stop service to China from more than 90 domestic cities."

Continental said its proposed route—for which it has allocated two Boeing 777s—would connect two of the most important financial capitals in the world, New York and Shanghai. The carrier said its proposed service would accommodate more people than other carriers, noting that the "New York/Newark-Shanghai market is nearly five times larger than the Dallas/Fort Worth-Beijing market, more than two times larger than the Detroit-Shanghai market and half again as large as the Washington-Beijing market," Continental said in a statement.

Northwest is proposing nonstop service between Detroit and Shanghai to begin March 25 next year using Boeing 747s with 65 business class and 338 coach seats. "Northwest's Detroit to Shanghai nonstop proposal will establish the largest and most effective China gateway for Eastern U.S. passengers," Doug Steenland, president and CEO, said in a filing. Northwest added that its proposed route "would serve 86 percent more single-connecting cities than the American proposal, 112 percent more connecting cities than United and 92 percent more connecting cities than the Continental application."

Meanwhile, United's "Capital to Capital" campaign touts proposed service on a 347-seat Boeing 747-400 to Beijing with three classes of service from Washington, D.C., which the carriers said is "by far the largest metropolitan area in the U.S. without direct service to China." Codeshare partner US Airways has supported United's application, which said that operations out of its Dulles hub would "offer connections to a vast number of cities through United's extensive network."

Corporate travel managers also have joined the fray by supporting preferred carriers, while encouraging DOT to select a route that would most benefit their travelers. All the major carriers seeking applications count corporations among those supporting their route applications.

Banta Corp. travel manager Beth Ebert filed a letter with DOT on behalf of Northwest saying, "The availability of new service to Shanghai would greatly enhance our access to this critical global market." Meanwhile, Burger King travel manager Miriam Abujasen, who filed on behalf of American, noted that its proposed gateway would the represent the only gateway to China from the South or Southwest region of the U.S., "bringing important competition to existing U.S. carrier gateways to China, currently restricted to Newark, Chicago and San Francisco."

Venture capital firm Cross Hill Financial Group wrote a letter in favor of United. Principal Stephen Graham wrote in a letter to DOT that "Washington has one of the largest concentrations of businesses of this kind and many are doing business with China. Our firm has targeted a number of Chinese business opportunities and we have a growing need for direct air travel to China."

The United States and China in 2004 signed an air services agreement, further opening access to the world's largest air travel market (BTN, July 26, 2004).

DOT awarded American and Continental the most recent China slots, allowing American this April to launch daily nonstop service from Chicago to Shanghai and Continental in June 2005 to launch nonstop service from Newark to Beijing. However, Continental said Northwest and United comprise an 80 percent share of U.S. to China business.

China's booming travel market and high growth forecasts would be a boon to the carrier granted approval by the DOT. United operates nonstop service between Beijing and San Francisco and Chicago. A Northwest spokesperson said the carrier is the only one applying for DOT approval that does not have a nonstop passenger flight between the U.S. and China, but does offer service to Mainland China via Japan.

The International Air Transport Association predicts average annual growth of nearly 10 percent for international traffic into China between 2005 and 2009 and 14.4 percent growth in freight.
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