With a Transportation Department selection of a new route to China expected within weeks, applications by four U.S. airlines are suddenly in varying states of flux. The stakes are high in the competition, with the winner gaining the right to begin flying March 25 from a U.S. hub to either Beijing or Shanghai. China service is extremely profitable, a result of high demand and limited routes because of a restrictive 59-year-old bilateral agreement that is slowly being expanded. In recent weeks, American Airlines ( AMR) has sought to revise its application for a Dallas-to-Beijing route after its pilots said the flight would require them to be on duty longer than their contract allows. The effort triggered a round of new filings by the four carriers. Northwest ( NWACQ), which is seeking a Detroit-to-Shanghai route, took the opportunity to re-emphasize an earlier suggestion that the award -- which actually involves seven weekly frequencies, rather than a single flight designation -- be split between two of the carriers. Meanwhile, Continental ( CAL) and United ( UAUA) are talking about a merger. Last week, Kevin Mitchell, chairman of the Business Travel Coalition, wrote to Transportation Secretary Mary Peters to advocate that the China award be postponed as a result. If either carrier were awarded the route, and if the merger were to occur, Mitchell said, the new United and Continental would have 42 weekly U.S.-China frequencies, more than all other U.S. carriers combined. "Such an outcome ... would have dramatic negative impacts for business travelers in terms of sharply higher airfares and fewer service options," he wrote in his letter.
United wants to fly between Washington and Beijing, whereas Continental has applied for Newark to Shanghai. Two weeks ago, American sought to add a Chicago stop on its westbound flight, though the return would be nonstop from Beijing to Dallas. The return segment falls within the pilot contract limit because of prevailing tailwinds. In its application, Northwest emphasized the possibility of a split award. "Awarding to two carriers would provide that much more competition," said Andrea Fischer Newman, Northwest's senior vice president for government affairs, in an interview. "You would have two flying the route and give people more competition
and more cities." While all the carriers say they would prefer seven frequencies, Newman noted that Continental and United stipulated in their applications that they would accept less. As for Northwest, "We want service, and we want it out of Detroit, but since there are only seven frequencies, we would take fewer in order to get an award," she said. Another question also hangs over the proceedings: Why aren't regulators considering a route between China and the world's busiest airport in Atlanta? The answer is that under the current bilateral agreement, revised in 2004, only the four U.S. carriers that had China routes by 2006 were given the right to apply for 2007 frequencies. Delta ( DALRQ), which operates the world's biggest hub in Atlanta, has no China service, making it unique among the five U.S. airlines with broad international operations. Delta has said it intends to apply for a route in 2008, when a new entrant carrier is permitted under the 2004 bilateral deal. Currently, there are just 12 nonstop routes between the U.S. and China. Chinese airlines fly half, and U.S. carriers fly half. United flies from both Chicago and San Francisco to Beijing and Shanghai. American flies from Chicago to Shanghai, and Continental flies from Newark to Beijing. Chinese carriers serve Los Angeles, San Francisco and Newark. Northwest has 21 weekly frequencies to China, all routed through its Tokyo hub.