China, US seal aviation agreement
By Wang Yu (China Business Weekly)
Updated: 2004-06-28 14:05

As the landmark Sino-US aviation market liberalizing accord nears a final seal, carriers, especially those from the United States, can neither hide their excitement nor wait any longer to cash in.

Aviation giant United Airlines (United) unveiled a statement very recently, expressing its gratitude towards governments of both the People's Republic of China and the United States for their collaborative effort, which resulted in a new agreement on liberalizing air services between the two countries.

"All of us at United are excited about the new agreement and the potential it represents. It will provide United with the opportunity to launch much-needed additional nonstop China service," John Tague, executive vice-president in charge of marketing, sales and revenue of United, said.

A woman looks at introductory materials from United Airlines at the firm's nationwide exhibition tour last year. The US aviation giant is getting ready to apply for daily, nonstop service between Chicago and Shanghai as the US and China concluded recently an aviation agreement to double the number of airlines flying between the two countries.[photocome]

"Both governments have worked hard to reach the agreement that will benefit travellers and support increasing commercial and cultural exchanges between the two countries. On the one hand, new service is needed immediately in China because travel demand in this market is at record levels. On the other hand, United has the infrastructure to meet China's demand by connecting our hub in Chicago, and travellers from the US Midwest and East Coast, with Shanghai, China's commercial and financial hub." Tague added.

Under the new agreement, the US carriers are eligible to apply for authority in a bid to launch daily, nonstop service between Chicago O'Hare International Airport and Shanghai's Pudong International Airport.

The new agreement offers United the opportunity to apply for additional nonstop service to China, as well as increases the carrier's code-share rights to China with Air China and Star Alliance members.

United currently is the only US airline providing nonstop service from the United States to China, with daily, nonstop flights between Chicago and Beijing, and San Francisco and Shanghai, as well as newly launched daily, nonstop service between San Francisco and Beijing.

The US airline in April opened a sales office in Guangzhou, which United is interested in serving in the future.

United currently is limited to 21 flights per week between the United States and China.

Landmark deal

Sidney Kwok (left), United's general manager for China and Mark Russell (right), United's managing director for the Pacific South region, prepare to cut a cake to celebrate the maiden nonstop flight linking Beijing and San Francisco. United Airlines, the leading carrier between the US and China, announced earlier this month that its new Beijing to San Francisco non-stop flight took off from Beijing, helping to open a new air service route between the two cities.[newsphoto]

US and Chinese negotiators concluded recently an aviation agreement to double the number of airlines flying between the two countries, and to allow a fivefold increase in flights over the next six years, officials said.

Chinese aviation officials could not be reached for comment on the deal. It was reported the deal will be sealed in China next month.

The deal, according to the Wall Street Journal, is a boost for both countries: US carriers will gain much-desired additional passenger and cargo traffic in the lucrative Chinese market and manufacturers there would enjoy greater access to cargo flights out of the mainland's regional hubs.

The deal could also significantly improve China's chances of landing a new Federal Express (FedEx) hub. In September, the cargo and parcel shipper said it would consider moving its current hub from the Philippines to the southern Chinese city of Guangzhou. Currently, FedEx is allowed just 11 flights weekly into China.

"The new deal will, with no doubt, give a shot in the arm to the international business and trade, since it will strengthen China's link to the global business arena, and thus keep driving the country's robust economy forward," David Cunningham, Federal Express (FedEx)'s Asia-Pacific president, commented.

"For FedEx, the milestone accord will offer a golden chance for us to enhance transport capacity and connect our global clients more closely to the blooming Chinese market," Cunningham stressed.

FedEx is the world's top express messenger and cargo service provider.

Expansion

It is predicted some US$60 billion worth of goods will be shipped out of China by air, as well as commodities worth US$61 billion will be imported by air cargo service this year.

After the signing of the market-opening agreement, the figure is widely forecasted to shoot up.

FedEx is planning to expand its operations in China this year in a drive to keep up with the country's fast-growing opening up process in line with China's World Trade Organization commitments.

Eddy Chan, FedEx's regional vice-president in China and the Mid-Pacific region said one of his immediate tasks is to expand the company's network of branches in China to achieve deeper market penetration.

Agreeing with FedEx, United Parcel Service (UPS), one of the world's largest package delivery companies and a global leader in supply chain services, also welcomed the agreement between the United States and China.

"It is a very positive move that will not only benefit China and the United States, but also impact the overall global business and trade circle. It will smooth export from and import to China, and thus benefit various enterprises, common consumers and ordinary employees," Ken Torok, president of UPS Asia-Pacific, commented.

The market-liberalizing Sino-US agreement was reached in Washington after four rounds of talks starting last February.

The last agreement to expand US-China air services was concluded in April 1999, when each country's carriers were allowed to increase their weekly flights in their markets from 27 to 54, and each side was allowed to designate one additional airline, for a total of four, to serve the market.

The new agreement will allow five additional airlines from each country to serve the US-China market.

The United States may name one additional all-cargo airline, while China may name either a passenger or cargo airline, to start services later this year.

The other four new-entrant airlines may be either passenger or cargo carriers, with one new carrier entering the market in each of the years 2005, 2006, 2008 and 2010.

The agreement will also allow an additional 195 weekly flights for each side -- 111 by all-cargo carriers and 84 by passenger airlines -- resulting in a total of 249 weekly flights at the end of a six-year phase-in period.

"This agreement recognizes the critical role of commercial aviation in the rapidly growing US-China trade relationship," Norman Mineta, secretory of the US Transportation Department, was quoted as saying by a foreign news agency. "This agreement represents a giant step forward in creating an international air transportation system that meets the needs of the new global marketplace."

At present, FedEx, UAL Corp's United, Northwest Airlines and UPS are the only US carriers allowed to fly to China. They want to expand services into the Chinese mainland, and other carriers, notably AMR Corp's (AMR) American Airlines, would like to begin offering services.

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