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TheStreet Open House

Airlines Recognize the Growth Is in Asia

SEATTLE ( TheStreet) -- With a recovery apparently under way, air service to Asia is starting to ratchet up.

FedEx (FDX - Get Report) on Tuesday took delivery of a 777-200 from Boeing (BA - Get Report). The aircraft will have a unique mission: regularly scheduled, non-stop trans-Pacific cargo flights from Memphis. Unlike current trans-Pacific cargo flights, this one won't have to make a fuel stop. Service will begin early in 2010.

"We're going to be able to offer service that no one else can offer with much later pickup times, as those planes do not have to stop as they come back across the Pacific," said FedEx CEO Alan Graft, on an earnings conference call last week. Flights will begin in January; FedEx hasn't identified its Asian gateway.

FedEx's non-stop service to Asia from Memphis will begin early next year.

Last week, AMR's (AMR) American said it will fly a 777-200 between Chicago and Beijing, starting in spring 2010. American won regulatory approval to begin the flight this year, but the global economic slowdown led to a delay of about a year.

In the short term, both FedEx and American are making bets on when Asian air service markets will recover. In the long term, the future seems obvious: Asian markets will grow more rapidly than others. That was a central conclusion in recently released annual forecasts by both Boeing and Airbus.

Over the next 20 years, Boeing said, the world will need 29,000 aircraft valued at $3.2 trillion, with Asia requiring 31% of the total. Growth will be most rapid in China, which is expected to "add the capacity of North America today over the next 20 years," said Drew Magill, director of marketing for Boeing Commercial Airplanes, at a recent investor conference.

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