"US airlines in battle for China routes"

Tuesday, November 23, 2004

US airlines in battle for China routes
NEW FLIGHTS: Beijing has agreed to more passenger and cargo flights from the
US over the next five years, and American carriers are lining up to get a
piece of the action 
The New York (NY) Times


Five US airlines are fighting for a business opportunity they have not seen
in 17 years: flights to China.

Over the next 15 months, the authorities in Beijing will allow two daily
round trips from a major city in the US to Shanghai or another large city in
China. They have also approved, in principle, additional routes for both
passengers and cargo, and those flights would be phased in over five years.

The first of the new routes is to begin next March, the next one in 2006;
the US Department of Transportation will determine whether this second route
will be for a passenger or cargo flight.

One or two routes to China does not sound like a big source of revenue for
an airline, but this represents a growth market for US airlines struggling
with troubled balance sheets and increased domestic competition from
low-cost carriers.

Since 1987, only two passenger airlines, Northwest and United, have flown to
China, because Beijing restricts air traffic from overseas. But in July, the
Transportation Department and the Civil Aviation Administration of China
negotiated an agreement that would allow the number of flights between the
two countries to increase nearly five-fold over the next five years, to 249
a week.

Almost as soon as the agreement was announced, the US airlines started
lining up. Three long-haul carriers -- Delta, American and Continental --
are competing against two smaller carriers, Hawaiian Airlines and North
American Airlines. United hopes to expand its business in the China market,
and so has also submitted a bid with the Transportation Department to fly
the new route. Northwest has filed for only a future cargo route and not for
passenger flights.

The airlines were to submit their final bids yesterday to the Transportation
Department, which will then choose the carriers for the two new
trans-Pacific routes.

Unlike the airline market in the US, where intense competition is making it
difficult for most of the large carriers to be profitable, routes to Asia
make money.

"China is obviously a big and growing market," said D. Scott Yohe, Delta's
senior vice president for government affairs.

Since 2000, passenger traffic between the US and China has increased 53
percent, to 185,000 passengers, in the first five months of this year,
according to the Bureau of Transportation Statistics.

"There's no question it's an important route for any airline," said Dan
McKinnon, the founder and president of North American Airlines, which is
based at Kennedy International Airport in New York. "It doesn't matter if
it's American, Delta or Continental. It's important for all of us."

Delta projected that it would get an overall economic boost of about US$400
million annually if it added service to China, though some analysts called
that optimistic. Hawaiian Airlines said the state of Hawaii could expect
about US$11 million more in tax revenue from it during the first year of
service to China.

American, while saying it did not have hard figures for revenue, said its
plan would be to fly 136,000 passengers to China the first year. 

"In the long run, we think this is a very profitable area of the world to be
in," said William Ris, American's senior vice president for government
affairs.

The competing airlines have started campaigns to win the routes. American,
the largest carrier, outlines its case on a separate Web site,
http://flyaatochina.com, and lists more than 100 members of Congress who
have sent letters of support to Transportation Secretary Norman Mineta.

Delta has set up a similar section on its Web site where people can e-mail a
letter to Mineta that says in part: "Delta's proposal to provide daily
nonstop service from Atlanta to Beijing in March 2006 is the best proposal."


A company spokeswoman said Delta supporters had sent at least 9,000
messages. 
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