Chinese School - US airlines in a frenzy for right to a new China route

Opinion / China Watch

US airlines in a frenzy for right to a new China route

(Bloomberg)
Updated: 2006-12-12 11:12

http://www.iht.com/articles/2006/12/11/bloomberg/sxroute.php?page=1

Washington -- Continental Airlines has handed out 5,000 fortune cookies
to members of US Congress, Transportation Department officials and other
Washington decision makers. Among the messages inside: "Shanghai: The
right route for the most people."

American Airlines boasts the backing of Wal-Mart Stores, the world's
largest retailer. Northwest Airlines has the support of Michigan and
Minnesota lawmakers. United Airlines does Northwest one better: It
brandishes a letter signed by the incoming speaker of the House of
Representatives, Nancy Pelosi, Democrat of California.

The four US carriers are all after the same prize: rights to a single new
air route between the United States and China authorized under a 2004
agreement between the two nations. At stake is annual revenue of more
than $100 million, along with greater access to the world's
fastest-growing economy in time for the 2008 Olympic Games in Beijing.

"This is about as public of a fight I've seen," said Jon Ash, president
of InterVistas-GA2, a Washington-based consulting firm. "The bidding gets
pretty ferocious. It's a limited resource, and everybody wants it."

The result is a competitive frenzy among the four airlines, and their
supporters. Public letter-writing campaigns organized by the carriers
have generated more than 400,000 messages to the US transportation
secretary, Mary Peters, who is expected to make the decision any day now.
At least 265 of the 535 members of Congress have already written her as
well.

The four US carriers, who are the only ones eligible to vie for the new
route, are currently allowed only 63 round trips to China weekly. The
only direct flights depart from Chicago, San Francisco and Newark, New
Jersey.

The much-coveted additional non-stop route, to begin next year, was
authorized under a 2004 revision to a 25- year-old treaty. Peters's role
is to decide which of the carriers' proposals would accomplish the most
good for the most people, her spokesman says.

Continental Airlines wants to add a flight between Newark and Shanghai;
AMR's American is proposing a route between Dallas-Fort Worth and
Beijing; UAL's United wants Washington and Beijing; and Northwest
Airlines seeks Detroit and Shanghai.

Aaron Taylor, an analyst with Eclat Consulting in Virginia, who studies
airline data, said that winning the route would mean $153 million a year
for United or Northwest, $113 million for Continental and $106 million
for American. The carriers decline to release their own revenue estimates.

International routes are generally more lucrative than domestic ones, and
"the route to be awarded should be particularly profitable because
traffic between the US and China is growing rapidly," said Philip
Baggaley, a Standard & Poor's analyst in New York. "There are limited
routes available, so there is a scarcity value as well."

The International Air Transport Association, in Montreal, said the number
of China air passengers will grow at an average annual rate of 9.6
percent through 2009. Only Poland will grow faster among countries with
at least two million annual passengers, the association said in its 2005
forecast.

To help make their cases, the carriers have enlisted companies that might
benefit from having easier access to China.

"We're always interested in moving our people as conveniently and
efficiently as we can," said Greg Martin, a spokesman for General Motors,
in Michigan, which wrote Peters to endorse Northwest's proposal. Having a
direct flight from Detroit "would certainly help," he said.

Similarly, Wal-Mart, based in Arkansas, is backing American's Dallas bid.
"We expect our need for air service to Beijing to increase," wrote
executives Duane Futch and Beth Keck. "It is important that our company
have easy, convenient access."

The carriers have also enlisted an array of Washington heavy-hitters.
United, for instance, hired the public- relations firm that employs a
former US Federal Aviation Administration chief, Jane Garvey, and counts
a former US secretary of state, Madeleine Albright, among its backers.

The New Jersey congressional delegation endorsed Continental in a Sept.
20 letter. The number of Asian-Americans in the New York-New Jersey area
"is larger than the Asian-American communities of Texas, Michigan and the
District of Columbia added together," the letter said.

"Continental has been good to New Jersey as well as other places," said
Representative Bill Pascrell, Democrat of New Jersey, a member of the
House Transportation and Infrastructure Committee. "If they want to
expand service, it's important that the delegation stand behind them."

United's prominent backers include Pelosi; the majority leader-designate,
Representative Steny Hoyer of Maryland; the Democratic Congressional
Campaign Committee chairman, Representative Rahm Emanuel of Illinois; and
the Senate deputy majority leader- designate, Richard Durbin of Illinois.

United has a hub in Pelosi's hometown of San Francisco, wants to fly out
of Dulles Airport adjacent to Hoyer's state and is based in Illinois.

"It's an important option for us to increase business travel to China,"
Durbin said. "I hope we'll be able to expand our exports to that country,
and I'm glad that United Airlines is offering that option."

Michigan and Minnesota lawmakers have written on behalf of Northwest,
which is based in Eagan, Minnesota, and has a hub in Detroit. "We're on
Northwest every week," said Representative Sander Levin, Democrat of
Michigan.

Letters and support are among the criteria the Transportation Department
will consider, said Michael Whitaker, United's vice president of
alliances, international and regulatory affairs. "If you are trying to
define a public benefit, you want to see how broad that support is,"
Whitaker said.

The public support "shows the department that what we are saying about
our case is true," said Hershel Kamen, vice president of regulatory
affairs at Continental.

The Transportation Department's goal is "to maximize public benefits," a
department spokesman, Bill Mosley, said. Broad support, he added, was
"something we take into consideration."

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