Air route authority between the United States and the People's Republic of China


Air route authority between the United States and the People's Republic of China

There are currently bilateral treaties which govern aviation rights between the United States and the People's Republic of China. Agreements cover both passenger services and cargo services. There is not an "open skies" agreement, which generally refers to an agreement that allows unrestricted flights between countries. The current treaty specifies the number of flights permitted. Due to the highly regulated nature of awards for route authority between the two countries and the strict limits on number of flights, the application process is competitive. U.S. airlines have sought to gain support from local politicians and the general public to influence the U.S. government into awarding to routes. [ [http://www.msnbc.msn.com/id/19810893/ Five U.S. airlines seek new routes to China] ]

The United States has liberal aviation agreements with many countries but not the People's Republic of China, Japan, Australia, South Africa, and some South American countries. [ [http://www.washingtonpost.com/wp-dyn/content/article/2007/05/23/AR2007052301120.html U.S., China Agree to Double Flights] ]

Current passenger flights operating

In 2006, there were 10 non-stop flights between the two countries with passenger traffic being 2 million per year. [ [http://seattlepi.nwsource.com/business/323022_chinatrade10.html U.S., China sign accord at Sea-Tac that could double flights between the two] ]

Four U.S. carriers and three Chinese carriers operate flights between the two countries under the air agreement (not including Hong Kong). United Airlines flies nonstop between Beijing and San Francisco, Chicago, and Washington as well as nonstop Shanghai service from San Francisco and Chicago. Northwest Airlines flies between Beijing, Shanghai, and Guangzhou and Tokyo with either connections or the same flight numbers continuing to the United States. Continental Airlines flies between Beijing and Newark, an airport near New York. American Airlines flies between Shanghai and Chicago.

Following a 1987 directive, six Chinese airlines were formed in 1988 when CAAC, the Chinese airline and government regulatory agency for aviation was split and reorganized. Air China flies non-stop Beijing flights to San Francisco, Los Angeles, and New York. China Eastern flies non-stop Shanghai flights to Los Angeles and New York. China Southern flies non-stop flights between Guangzhou and Los Angeles. China Southern began service to the United States in August, 1997. [ [http://biz.yahoo.com/bw/070815/20070815006096.html?.v=1 China Southern Honors 10-Years of Sino-USA 777 Service] ]

The airlines flying China-United States cooperate in airline alliance and codesharing. The first marketing alliance between airlines of the two countries began on April 26 1996 between Northwest Airlines and Air China [http://www.nwa.com/corpinfo/upclose/1990.shtml Northwest Historical Timeline (1990)] ] which has since been discontinued. Star Alliance include United Airlines and Air China, which signed agreement to join in May, 2006. [ [http://www.staralliance.com/en/press/press_releases/2006/20060522_airchina.html Air China limited to become a Star Alliance member carrier] ] Northwest, Continental and Delta are members of Skyteam. China Southern joined in August, 2004. [ [http://www.skyteam.com/CZ/aboutSkyteam/pressCenter/pr280804.jsp SKYTEAM SIGNS AGREEMENT WITH CHINA SOUTHERN AIRLINES] ] American is a member of oneworld. China Eastern codeshares with several oneworld airlines and has expressed an interest in joining. [ [http://www.china.org.cn/english/travel/206061.htm China Eastern to Join Oneworld Alliance] ] Participating in airline alliances and codesharing is intended to increase passenger traffic on the airline by allowing reciprocal frequent flyer program benefits and increasing the number of flights that an airline offers, even if some of the flights are clearly operated by another airline.

Starting in late 2007, Mesa Air Group, who operates smaller regional jets in the United States plans to begin operating a joint venture with Shenzhen Airlines. The new joint venture would operate a Beijing based airline flying domestic Chinese routes. [ [http://www.usatoday.com/money/biztravel/2006-12-21-beijingair-usat_x.htm Mesa Air to be first U.S. carrier in Chin] ] The domestic flights are not governed by the air agreement between China and the United States.

Early history

In 1979, diplomatic relations between the People's Republic of China and the United States were established. Previously, there had been no air service between China and the United States after 1949 although there were flights between the United States and sections of China controlled by the government based in Taipei (Republic of China).

In January 1981, CAAC and Pan Am began flying between the People's Republic of China and the United States. [ [http://query.nytimes.com/gst/fullpage.html?res=9903E0DC123BF93AA15752C0A967948260 Pan Am Service to China] ] Northwest Airlines resumed flying to China in 1984. Facing financial troubles, Pan Am sold its Pacific route authority, as well as aircraft and equipment, to United Airlines in 1985 leading to United Airlines operating former Pan Am routes over the Pacific in February, 1986. [ [http://www.everythingpanam.com/ everythingPanAm] ]

Hong Kong, which was previously a British Crown Colony until 1981 and a British dependent territory from 1981-1997, is now a part of the People's Republic of China but has a separate air agreement with the United States. [ [http://findarticles.com/p/articles/mi_m0CWU/is_2005_April_28/ai_n13660588 Hong Kong will consider expanding US air travel agreement] ] Macau, formerly governed by Portugal but now governed by the People's Republic of China, also has a separate air agreement with the United States. The province of Taiwan is considered to be a part of China by both the People's Republic of China and the Republic of China, but the island is under defacto control by the government based in Taipei, not Beijing. Due to the severing of diplomatic relations with the Republic of China (Taiwan) by the United States in 1978 in order to establish relations with the People's Republic of China and because the mainland government does not control the province of Taiwan, there is currently no air service agreement between the United States concerning the province. However, there is an air service agreement between the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the United States. [ [http://cryptome.org/ait101306.htm US Unofficial Agreements with Taiwan] ]

Due to the small number of flights, air fares tend to be high between the two countries. [ [http://www.voanews.com/tibetan/archive/2004-07/a-2004-07-24-2-1.cfm US, China Sign Agreement to Increase Commercial Flights] ]

Although the stated goals of both countries is for an open skies agreement, the process of reaching such an agreement has taken several years and has not been completed. Liu Weimin, director of the Aviation Laws Research Centre with the Civil Aviation Management Institute of China, has said "Under the current market situation, local carriers have a hard time competing against global giants such as Continental. That is why US airlines are enthusiastic to fly to China, while Chinese carriers are hesitating to open more flights. For local airlines, more flights may mean more losses if they cannot get enough passengers." [http://english.peopledaily.com.cn/200609/30/eng20060930_307810.html (Continental) Airline hopes for Shanghai flight] ] There have been reports that the load factors (percentage of seats sold) in business and first class are lower on Chinese carriers compared to U.S. carriers. ["Whitaker said United's China flights were some of the more profitable ones because they were generally full, including the lucrative business and first-class sections.In contrast, Chinese carriers offering international service cater predominantly to Chinese passengers. Those airlines often have plenty of vacancies in business and first class, making some of those routes unprofitable." [http://travel.latimes.com/articles/la-trw-chinaair7aug07 U.S. airlines vie for new nonstop LAX-China routes] ]

Not all of the route authority of the Chinese airlines are used.

Discontinued non-stop service

The first scheduled non-stop flight between the two countries by a U.S. carrier took place on May 1 1996 between Detroit and Beijing and was operated by Northwest Airlines. Northwest Airlines began Detroit-Shanghai non-stop flights twice a week starting April 6 2000 [ [http://english.people.com.cn/200101/15/eng20010115_60543.html Northwest Airlines to Improve China-US Passenger, Cargo Service] ] , before discontinuing non-stop service 18 months later and discontinuing non-stop Detroit-Beijing service in 2002 [ [http://www.bizjournals.com/atlanta/stories/2007/07/23/daily62.html Delta makes case against competitors for China routes] ] . As of 2007, Northwest Airlines is the only airline authorized to fly China that does not offer any nonstop service to that country.

In May 2000, United Airlines discontinued Shanghai-Tokyo service and launched its first US-China nonstop service from San Francisco to Shanghai. In June 2004, United Airlines discontinued Beijing-Tokyo service and started non-stop Beijing-San Francisco service. This replacement of services was done because of the restrictions on the number of flights permitted under the 1999 air services agreement [ [http://english.people.com.cn/200404/13/eng20040413_140225.shtml United Airlines pins high hopes on China] ] . Since then, all China routes serviced by United Airlines are nonstop.

China Eastern began service to San Francisco in 1997 but has since discontinued passenger service to the airport, though cargo flights continue to be operated. [ [http://www.irasia.com/listco/hk/chinaeast/annual/97/chairst.htm China Eastern Airlines Corporation Limited Chairman's Statement] ] Passenger service to Chicago via Seattle has also been discontinued. Several Chinese airlines operated services to Anchorage, primarily as a fuel stop but such stop is no longer operated, in part because of long range aircraft in service.

1999 Air Services Agreement

Concluded in April, 1999, airlines from each country were allowed to increase the number of weekly flights from 27 to 54, including cargo flights. [http://www.dot.gov/affairs/dot09004.htm NHTSA Proposes Requirements For Voluntarily Installed Event Data Recorders] ] 20 of these flights were designated for all-cargo flights. Each country was allowed to designate one additional airline so that four airlines from each country was allowed to fly between the two countries. [ [http://transportation.northwestern.edu/sources/China-US_Air_Cargo_Jul07_Tanger_vD.pdf The Air Cargo Market between China and the United States: Demand, Developments and Competition (2007)] ]

United Airlines gained additional frequencies under this agreement and, in April, 2000, started non-stop Shanghai-San Francisco service. [ [http://sec.edgar-online.com/2000/03/15/08/0000101001-00-000002/Section2.asp United Airlines Inc Annual Report] ]

2004 agreement

A new agreement was signed July 2004 [ [http://goliath.ecnext.com/coms2/gi_0199-555172/United-States-China-sign-agreement.html United States, China sign agreement on expanded air services.] ]

The agreement allowed each country’s carriers to serve any city in the other country. In practice, service between the two countries occurs between 3 large Chinese cities and a few cities in the U.S. Prior to the agreement, Chinese carriers were limited to 12 U.S. cities, and U.S. passenger carriers to only five Chinese cities. The agreement permitted unlimited code-sharing between U.S. and Chinese airlines, which had previously been limited to certain cities.

At the time of the agreement, there were plans for additional negotiations to begin in 2006 which led to another agreement in 2007.

The 2004 agreement led to the 2005 expansion of flights between the two countries as well as new service by Northwest Airlines from Tokyo to Guangzhou, which began on November 1 2004, operated using Boeing 757 aircraft. [ [http://www.nwa.com/corpinfo/upclose/2000.shtml Northwest Historical Timeline (2000)] ] United Airlines began non-stop Chicago-Shanghai flights on October 31 2004. [ [http://www.bizjournals.com/pacific/stories/2004/10/25/daily70.html United Airlines to fly Chicago-Shanghai] ]

2005 expansion

In June, 2005, the U.S. Department of Transportation awarded American Airlines authority to fly between Chicago and Shanghai as well as authority to Continental Airlines to fly between Newark and Beijing. [http://www.allbusiness.com/transportation-communications/transportation-services/4140070-1.html DOT Awards China Route Authority To United] ]

2006 expansion

In 2006, several U.S. airlines applied for additional route authority that was granted in 2007. The United Airlines application to fly between Dulles International Airport near Washington, D.C. and Beijing was selected. The route started operating on March 25 2007 using Boeing 747-400 aircraft. The (U.S.) Department of Transportation cited that United's Washington-Beijing proposal would fill the critical service gap between the Washington, D.C. metropolitan area and China, provide the greatest increase in capacity, and noted that the Washington, D.C. metropolitan area is the largest city in the proceeding lacking any nonstop service to China. [ [http://www.dot.gov/affairs/dot1707.htm DOT Awards New Daily U.S.-China Flight to United Airlines ] ]

In addition to United's application, American Airlines, Continental Airlines and Northwest Airlines had also applied for route authority.

Continental applied for rights to fly between Newark, New Jersey, and Shanghai. Northwest applied for the right to fly to Shanghai from Detroit. American's application originally was for non-stop service between Dallas/Fort Worth and Beijing, but changed the application to include an eastbound stop in Chicago after an impasse with pilots regarding work hours on the planned flight. [ [http://www.usatoday.com/travel/flights/2007-01-09-china-route-awarded_x.htm United wins new route to China] ]

2007 agreement covering expansion from 2007 to 2009

In April, 2006, the two countries began negotiations for further liberalization of the bilateral agreement. Talks were suspended in August, 2006 but later resumed. The United States has stated that suspension of talks was due to an unrelated issue. [ [http://usinfo.state.gov/xarchives/display.html?p=washfile-english&y=2007&m=January&x=20070129151507saikceinawz0.9439051 Opening Market with China Tops U.S. Civil Aviation Priorities] ] Unofficial Chinese sources report that there was concern because of a "gap" in Chinese airlines ability to compete with U.S. airlines. Negotiations were scheduled to resume in January, 2007. [ [http://www.nyconsulate.prchina.org/eng/xw/t283706.htm China-U.S. first strategic economic dialogue ends] ]

An agreement reached on July 7 2007 allows nearly unlimited service between the People's Republic of China and Guam and the People's Republic of China and the Northern Mariana Islands. These unlimited rights do not include Beijing or Shanghai flights operated by U.S. airlines but do include those cities for mainland Chinese airlines.

Not including the potential expansion to Guam and Saipan (Northern Mariana Islands), by 2011 the current bilateral between the two countries will expand the number of U.S. airlines flying to China from four to nine airlines and from 54 passenger flights weekly to 249. [ [http://usinfo.state.gov/eap/Archive/2005/Mar/14-492650.html U.S. Hopes for Open Skies Agreement with China] ]

Negotiations for an open skies agreement will begin not later than March 25 2010 according to a treaty between the two countries. [ [http://www.dot.gov/affairs/052307china.htm U.S. – CHINA AIR SERVICES AGREEMENT] ] [http://www.state.gov/documents/organization/88275.pdf U.S.-China Air Transport Agreement of July 9 2007] ]

For the 2007, 2008, and 2009 awards, the Department of Transportation awarded routes at one time instead of considering one year at a time. United and Delta objected unsuccessfully to have the process separated. [ [http://dmses.dot.gov/docimages/pdf101/476459_web.pdf 2007/2008/2009 U.S.-CHINA AIRSERVICES AND COMBINATION FREQUENCY ALLOCATION PROCEEDING ORDER ON RECONSIDERATION] ]

2007 expansion

One award to a new entrant, an airline not currently flying to China, was decided. Delta applied for Atlanta-Shanghai using 777-200ER initially then 777-200LR when they are delivered in 2008. Northwest applied for route authority as a new entrant claiming that although it currently flies to the People's Republic of China, it does so via Japan and not non-stop. It envisioned using a 747-400 if awarded the route in 2007 but planned to use a 787 if awarded the route in 2009.

Several sources have noted before the route authority was granted that Delta was virtually assured of being awarded the route. [ [http://www.aviationweek.com/aw/generic/story_generic.jsp?channel=aviationdaily&id=news/DLPVG06257.xml Delta A Shoo-In For China, But Start Date Unclear] ] [ [http://thehill.com/business--lobby/airlines-battle-to-provide-lucrative-flights-to-china-2007-07-31.html Airlines battle to provide lucrative flights to China] ] [ [http://www.usatoday.com/travel/flights/2007-07-02-delta-china_N.htm Delta in line for non-stop route to China] ] The DOT awarded the route to Delta on September 25, 2007. Delta announced that it will begin service on March 30, 2008, one of the latest dates that they were allowed to begin. [ [http://money.cnn.com/news/newsfeeds/articles/primenewswire/127339.htm Delta Air Lines Wins Rights to Serve China Nonstop From Atlanta] ]

2008 expansion

One award for flights between Guangzhou and the United States was granted. Only United Airlines applied and was granted rights. It plans San Francisco to Guangzhou service using a Boeing 777. [ [http://www.usatoday.com/travel/flights/2007-09-25-china-flights_N.htm Six non-stop U.S.-China routes OK'd] ]

2009 expansion

New entrants

One award was granted to a new entrant airline as stated by the DOT when applications were sought. Hawaiian Airlines has withdraw its application. US Airways applied for Philadelphia-Beijing authority using an Airbus A340-300, an aircraft that it currently does not operate nor has any firm orders to buy. Maxjet applied for rights between Seattle and Shanghai using an all business class configured Boeing 767-200ER. US Airways was granted rights by the DOT over Maxjet citing more seat availability and greater connecting possibilities with the US Airways bid. [http://dmses.dot.gov/docimages/pdf103/487893_web.pdf 2007/2008/2009 U.S.-CHINA AIR SERVICES AND COMBINATION FREQUENCY ALLOCATION PROCEEDING FINAL ORDER AND ORDER TO SHOW-CAUSE] ]

Airlines that already fly between the two countries

Three routes to U.S. carriers that were not new entrants were awarded. There were applications for six routes. Northwest applied for Detroit-Beijing using a Boeing 787 to be granted if it is not award the route using a Boeing 747-400 in 2007. It also applied for a 787 operated Detroit-Shanghai route.

United Airlines applied for Los Angeles-Shanghai using 747-400 aircraft. Washington-Shanghai is an alternate routing of above application.

American Airlines applied for Chicago-Beijing. Continental has applied for Newark-Shanghai using a Boeing 777-200ER Continental had previously applied for the same route some years earlier in which United was awarded the Washington-Beijing route. Delta has applied for Atlanta-Beijing using a Boeing 777.

The American Airlines, Continental Airlines and Northwest Airlines route applications were granted. The DOT cited the United application as "not addressing the broader competitive needs" given that United has approximately half of the flights by U.S. carriers to China. The DOT cited American's OneWorld airline alliance as having less access to the U.S.-China market as one of the factors in its decision.

In a hint of the DOT's decision making process and preferences, it stated in their report stating its intention to grant Continental and American Airlines route authority that "this tentatively leaves seven frequencies to be awarded...Delta and Northwest." The DOT stated that Northwest, which already has route authority between Detroit and China but has chosen to fly the route via Tokyo (though it did operate some non-stop flights in the past), was applying for additional Detroit-China authority. Such application was denied in the past due to the limited number of new route authority but that now there is more leeway with more flights permitted by treaty. The DOT selected Detroit-Shanghai over Detroit-Beijing. The DOT noted that Delta was not awarded its route application because it would not have much experience in the Chinese market when the 2009 award was to start given that it will only begin Atlanta-Shanghai service on March 30, 2008.

New restrictions on sale of route authority by U.S. carriers

The DOT also announced, along with its 2007-2009 route authority awards, that route authority must be operated for five years before they could be sold. Previously, the required period was one year.

References


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