U.S. and Chinese regulators at least tentatively have approved carriers to launch 16 additional routes and 107 weekly frequencies through 2009, nearly doubling the current 109 to 216.
Travel buyers welcomed the route awards announced in recent weeks by the U.S. Department of Transportation and China's Civil Aviation Administration, as corporate demand from the United States to China remains robust. Industry watchers, though, said air supply connecting the two countries will remain constrained.
DOT last month awarded authority to Delta Air Lines and United Airlines to launch new routes to China within the next year. DOT also awarded the remaining U.S. legacy carriers tentative approvals for service to commence in 2009.
Delta gained approval to immediately launch its Atlanta-Shanghai route, but late last month began taking reservations for a daily flight slated to go into effect March 30, 2008. However, CEO Richard Anderson said the goal is to begin two-class Boeing 777 service as soon as possible. "We're waiting on two deliveries of two 777s from Boeing," he said. "We have the rights and we're working with Boeing, so we'll announce the service date once we know the in-service date on the Boeing 777s."
United is approved to launch San Francisco-Guangzhou flights beginning March 25, 2008.
"There's been a whole bunch of new routes awarded, but most of them won't start until 2009," said American Express Advisory Services senior practice leader for air Mitch Cwanger. "Supply is increasing slowly, and I don't think there is enough capacity in the marketplace to satisfy demand."
Meanwhile, DOT tentatively awarded US Airways the right to Philadelphia-Beijing service beginning March 25, 2009, which also is the proposed launch date of three other tentative awards: American's Chicago-Beijing service, Continental's Newark-Shanghai flights and Northwest's Detroit-Shanghai service.
This year's new bilateral agreement between DOT and China's Civil Aviation Administration allows U.S. carriers to launch 13 new daily flights between the two countries by 2012, more than doubling their total to 23
(BTN, June 11). DOT next will award U.S. carriers three route authorities that become available in 2010 and two apiece in 2011 and 2012.
Meanwhile, the Civil Aviation Administration last month said Chinese carriers would launch 27 flights to Europe and the United States by 2009 (see chart).
DOT in the award filing said U.S. carriers currently operate 70 weekly flights into China. United holds the largest U.S.-China marketshare, with 35 weekly flights. The carrier this year added nonstop service between Washington, D.C., and Beijing. American last year launched daily nonstop service from Chicago to Shanghai, and Continental in 2005 launched nonstop service from Newark to Beijing. Northwest does not have a nonstop flight between the United States and China, but does offer 21 weekly flights to China via Japan. Neither Delta nor US Airways serve China.
DOT said only three Chinese carriers directly serve the U.S. market, with a total of 39 weekly flights: Air China operates daily service from Beijing to New York, Los Angeles and San Francisco; China Eastern operates daily Beijing-Shanghai-Los Angeles service and four weekly Shanghai-New York JFK flights; and China Southern operates five weekly flights between Guangzhou and Los Angeles.
Though American Express' Cwanger said capacity has risen in recent years, demand has grown at a greater pace. Citing adjusted figures for 2007, he said American Express clients have taken 18 percent more trips to China this year over last, and 35 percent more trips compared with 2005. One-way business class fares to China rose to $2,958 for the first six months of this year, he said, compared with a $2,612 average for full-year 2006.
U.S. carriers overwhelmingly seek routes to Shanghai and Beijing—China's financial and political capital, respectively. However, corporate demand extends into China's interior, which Cwanger said requires more complex arrangements.
"Direct always seems to be the preferred way to go, but it's not always possible when you're going to China," said Randy Lynch, president of Chicago-based TravNet and Kipling & Clark, which manages Asia/Pac air transactions for small and midmarket companies.
Asia-based carriers are touting existing service connecting U.S. passengers to Chinese cities through their hubs. "It's been so restrictive in terms of adding new flights, and the market's been growing so fast, there's not enough capacity for demand," said Korean Air marketing director John Jackson. "U.S. airlines will only be able to add a little bit of capacity and that still doesn't satisfy the demand."
Korea-based carriers face a much less restrictive environment to gain access into China than do its U.S. counterparts, Jackson said. Aviation between Korea and China is "not true Open Skies, but pretty close," Jackson said. With service to more than 22 cities in China, Jackson said Korean now serves more cities in China than in its home market. The carrier said its passengers from the United States to China in the past year grew 55 percent, a pace of growth it expects to continue through 2010.
Meanwhile, Japan Airlines is one of the most represented foreign carriers in China, said vice president of passenger sales for the Americas Steve Smith, with a "convenient" connecting point in Tokyo. JAL serves many cities beyond Beijing and Shanghai, and Smith said U.S. traffic is strong.
All Nippon Airways serves 10 cities in China and is seeing growing U.S. connecting traffic, said national director of market development Gary Weiss. ANA this year also launched business jet service to Guangzhou from Japan's Nagoya Airport.
U.S.- and China-based carriers have tried to fill gaps through codeshare and alliance partnerships. "We plan to continue expanding our Asian codeshare links through agreements with Air China, Shanghai Airlines, Singapore Airlines and others," said US Airways CEO Doug Parker.
Delta said its codeshare partnership with China Southern would link the carrier to 15 points from Shanghai and 35 points from Beijing. SkyTeam—whose members include Delta, Continental and Northwest—is preparing this year to add China Southern as a member.
American Airlines senior vice president of sales David Cush said the carrier through JAL serves about 20 destinations in China, and codeshare connections with China Eastern offer further connections. Hong Kong's Dragonair is slated to join AA's Oneworld alliance on Nov. 1.
United said it serves into China's interior through a partnership with Air China, which plans to join United's Star Alliance.