U.S. Seeks More China Flights - TheStreet

U.S. officials remain hopeful that within the next few weeks, their counterparts in China will re-enter talks aimed at speeding up an increase in air traffic between the two countries.

In discussions the officials from each side held Jan. 30-31 in Beijing, "the overall tone was quite good," said Andrew Steinberg, assistant secretary for aviation and international affairs at the Department of Transportation, in an interview. "The goal is to make changes in the agreement this spring, and I'd like to see another round in the next several weeks."

Steinberg also indicated that route authorizations for next year's frequencies to China will likely be awarded in a timelier manner than were those for 2007 routes. On Feb. 8, the DOT granted

UAL's

(UAUA)

United Airlines the authority to begin flying a Washington-Beijing route at the end of March.

For the 2008 routes, Steinberg said the DOT hoped to avoid making assignments too close to the service date. So far,

Delta

(DALRQ)

and

US Airways

(LCC)

have filed for passenger flights that could begin March 25, 2008. Delta would fly between Atlanta and Shanghai, while US Airways hasn't specified a route.

Currently, just 11 daily nonstop flights, on average, are offered between the U.S. and China. Given that China is the United States' second-largest trading partner, the demand for seats far exceeds supply, said the Transportation Department, in its ruling on the 2007 flights. Under a treaty agreement, only seven weekly frequencies (one daily flight) are available each year in 2008, 2009 and 2010.

A Level Air Field

In a press release dated Feb. 7, the Chinese Civil Aviation Administration said that while "the new round of bilateral aviation talks between U.S. and China failed to bear any fruit," the two sides agreed to keep talking.

The agency said U.S. negotiators want to "fully liberalize" the market, but Chinese officials believe it is too early because Chinese airports are congested. Additionally, the release said Chinese airlines are disadvantaged in the U.S. market, where Air China lost $600 million in 2005. Nevertheless, China "stressed its intention to continue" the talks, the release said.

According to Steinberg, "a fully liberalized agreement will benefit China as much as the United States

because aviation is an enabling industry that helps other forms of commerce, and the Chinese need to understand that aviation is part of the overall economic relationship."

The U.S. would benefit, he said, because professional services is one of the few areas where a trade surplus with China exists, and more flights would enable more professionals to visit. For the Chinese, Steinberg said, a single widebody flight would bring an estimated $200 million to $250 million in economic benefit. "That should eclipse all other issues," he said.

Chinese carriers would also benefit. Currently they don't fully utilize their U.S. rights: Steinberg said the U.S. would welcome more service and would help the Chinese to develop it. He said Chinese carriers could enhance their ability to form partnerships with U.S. carriers, while marketplace competition could encourage them to develop a premium product.

The Chinese have also objected to visa restrictions for Chinese citizens. Steinberg said that while security concerns have prompted changes in U.S. visa policy, none is exclusive to the Chinese. In any case, it should not be assumed that U.S. travelers are less likely than Chinese travelers to select a Chinese airline. The success of carriers like Cathay Pacific and Singapore Airlines indicates that U.S. travelers "will fly on the highest-quality airlines, sometimes on a U.S. carrier and sometimes on an Asian carrier," he said.

American

(AMR)

is also hopeful the negotiations over increased flying will continue, said Don Casey, managing director of international planning, in an interview. More talks would provide an indication that the Chinese "are at least considering the issue," he said.

Casey said that the issues raised by the Chinese in the January talks were similar to those raised in 2006 talks, but that the U.S. had newly linked the aviation treaty to the trade imbalance. "That's taking a much broader perspective (than previously)," he said.

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