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American Shipper

U.S., China air agreement further opens bilateral market

U.S., China air agreement further opens bilateral market

   The United States and China have negotiated a new air services agreement that will increase the number of airlines of each country allowed to operate in their bilateral market, and will permit a nearly five-fold increase in weekly flights between the two countries over the next six years.

   U.S. Transportation Secretary Norman Y. Mineta said Friday the “landmark air services agreement” will boost the number of U.S. airlines that may serve China from four to nine. The DOT did not name the airlines to be allowed in this market.

   The agreement will also substantially increase the “doing business” freedoms of U.S. carriers in China, including the right for U.S. cargo airlines to establish hubs in China, the DOT said.

   Friday’s agreement will allow five additional airlines from each country to serve the U.S.-China market. The United States may name one additional all-cargo airline, while China may name either a passenger or cargo airline, to start service 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 only U.S. airlines that can fly to China today are United Airlines, Northwest Airlines, Federal Express and United Parcel Service.

   The U.S./China air service agreement also will 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. Fourteen of these flights will be available for new U.S. passenger services later this year, the DOT said.

   The two sides also agreed to allow each country’s carriers to serve any city in the other country. Chinese carriers are limited to 12 U.S. cities, and U.S. passenger carriers may fly to only five Chinese cities. The agreement also will permit unlimited codesharing between U.S. and Chinese airlines, thus expanding on the current agreement, which allows codesharing only to a limited number of cities.

   The latest agreement also provides that, when carriers establish cargo hubs in the other country, they will be afforded a high degree of operating flexibility, and expands charter opportunities beyond those provided by the existing agreement.

   Mineta said that even as U.S.-China aviation services have remained limited, trade between the two countries has grown dramatically, increasing in value from $4.8 billion in 1980 to $170 billion in 2003. The United States is China’s largest export destination, and China is the fastest-growing U.S. export market, the DOT said.

   The agreement was reached in Washington after four rounds of talks starting last February. The last agreement to expand U.S.-China air services was concluded in April 1999, when each country’s carriers were allowed to increase their weekly flights in the market from 27 to 54, and each side was allowed to designate one additional airline — for a total of four — to serve the market.

   The two sides will resume talks in 2006 to review the aviation relationship and make further progress on liberalizing the agreement. “While the terms of the agreement take effect immediately, formal signing of the agreement is expected within the next month,” the DOT said.