US airlines claim progress on open rights discussions

PUBLISHED : Saturday, 12 June, 2004, 12:00am
UPDATED : Saturday, 12 June, 2004, 12:00am

United States aviation officials yesterday continued to press their case for greater access to mainland passenger and cargo markets as the two sides 'made progress' towards forging a new Air Services Agreement, according to sources close to the talks.

The scheduled three-day bilateral meeting began on Wednesday in Washington, with US private-sector participants from at least seven airlines pushing for access to China's lucrative market and the four established carriers looking to expand their rights.

'We essentially presented them with our proposals and made our cases for why having open rights would be a good thing for China,' said one US executive. 'We outlined to them how it could work on an operational level if we were awarded the right to set up hubs on the mainland.'

US passenger airlines were strongly represented on the first day, with at least four carriers - American Airlines, Delta Airlines, US Airways and Continental Airlines - seeking entry into the China market. United Airlines and Northwest Airlines already have rights to China, and are seeking expansion.

The executive said the talks also included access to secondary cities and markets outside Beijing, Shanghai and Guangzhou, China's 'big three' destinations for commerce and tourism. 'Discussion was not limited to specific points of destination,' the executive said.

With China's major airlines - Air China, China Southern Airlines and China Eastern Airlines - already owning rights to US destinations they have yet to begin servicing, it is believed a one-for-one rights exchange was not on the table.

US negotiators are said to be focused on illustrating the domestic commercial benefits of liberalisation, particularly for cargo.

All-cargo carriers Polar Air Cargo, Evergreen International Airlines and Kalitta Air are seeking rights to fly to China, while incumbents Federal Express and United Parcel Service are pressing for the expansion of existing rights and the regulatory flexibility to set up hubs on the mainland.

The China air-cargo market is booming, especially for high-value goods such as computer peripherals, high-end fashion, perishables and pharmaceuticals.

The value of air cargo moving between Hong Kong and the US - a reliable snapshot as 90 per cent of Hong Kong's outbound cargo originates from China - jumped a comparative 23 per cent in the first four months to HK$54.2 billion.

A key right US cargo operators want is to 'change gauge' - or permission to fly a larger, B747-sized plane into a city and distribute those goods to onward regional destinations on smaller aircraft.

'Change of gauge is still being discussed,' the executive said. 'I think the governments marked some numbers out [for additional frequencies], but it all hinges on a general agreement over a larger strategy. For example, if you agree on change of gauge, you don't need to award as many frequencies.

'Discussion may be general in some areas still, but it can all come together very quickly when the big pieces fall in place. We were definitely closer to a deal [yesterday] than we were [Thursday].'

The China international express market, valued at about US$1.2 billion last year, is expected to grow 35 to 45 per cent this year, according to DHL Express.

The mainland side, represented by the General Administration for Civil Aviation of China (CAAC), initially planned to push for simpler visa application procedures for mainlanders visiting the US.

However, the issue is not on the table this time, according to a CAAC official in Beijing.

'It falls beyond our rights as an aviation regulator,' he said. 'The issue will be tackled by the relative governmental departments.'

Complicated visa applications for Chinese tourists and businessmen are seen as a major impediment for mainland carriers to develop their transpacific operations.