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Tue, Nov 23, 2004 - Page 12 News List

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


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.

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