Open Skies agreements also have a good side for U.S. airlines. The side over the Pacific is particularly attractive.
Even before the heated debate on Open Skies policy between the big three U.S. airlines and the big three Gulf airlines over transatlantic routes, a curious dynamic has been brewing with U.S. carriers wishing for Open Skies extensions over the Pacific.
As a recent report by OAG Aviation asks: Is it time for China-U.S. Open Skies?
By capitalizing on the established U.S.-China Air Transport Agreement, U.S. carriers have dramatically grown their market share on routes to China, even moving up plans to expand services to capitalize on the benefits of recent, more liberal visa policies.
The principle argument in favor of extending existing air transport agreements between the U.S. and China to full Open Skies agreements hinges on the considerable projected growth of demand in this market, enhanced by recent visa liberalization in the U.S. The suggestion is that Open Skies policies, allowing greater frequencies and a greater selection of city-pairs available to U.S. carriers would help address this demand.
“An alternative means of adding capacity to meet demand growth might be to use larger aircraft on the permitted routes but none of the U.S. or Chinese airlines have A380 aircraft on order which is the aircraft that could quickly add capacity. Is now the time to take seriously the idea of China-U.S. Open Skies?” The report concludes.
U.S. Carriers Have the Lead In China But That’s Changing
As the Centre for Aviation (CAPA) reports, Air China and United Airlines have been competing for the title of largest carrier between the two countries, with Air China holding more destinations and United enjoying more city-pairs, frequencies and seats.
Air China flies to Honolulu, Houston, Los Angeles, New York-JFK, San Francisco, and Washington Dulles from Beijing offered 2,300 flight frequencies in 2014 with 2,576 planned for 2015 and 706,320 seats for 2014 with 804,862 seats planned for 2015.
United flies to Beijing and Shanghai from Chicago, Los Angeles, Newark, San Francisco, and Washington Dulles with 2,963 flight frequencies in 2014 and 3,261 frequencies planned for 2015. United had 885,686 seats on these routes for 2014 and plans 994,385 seats for 2015.
In fact, United’s service to China outranks all rivals serving U.S.-China routes, Chinese and U.S. carriers alike.
Delta Airlines will launch Los Angeles to Shanghai service this July and reportedly plans to dedicate most of the 20 777-300ERs it has on order with Boeing to the trans-Pacific market, CAPA indicates.
But as CAPA also reports, the market is balancing out, with Chinese airlines gaining marketshare with CAPA predicting market split of 51% to US airlines and 49% to Chinese airlines in 2015 (excluding Hawaii).
As we’ve seen, Chinese airlines are improving their services and in-flight product to attract a greater share of high-revenue premium passengers and tourist class passengers alike. These added services and comforts could tip the scales further in favor of Chinese airlines for these profitable routes.
The leading Chinese airlines, Air China, China Eastern, and China Southern are government owned and thus enjoy special protections. These special protections have previously been blamed for stifling competition within China and in the region.
None of this has put a damper on the big three U.S. airlines’ enthusiasm for China yet. There are benefits to U.S. business of increased trade with China, facilitated by more frequent airline services, and benefits to U.S. tourism from more Chinese visitors. Chinese airlines also make significant investments in Boeing aircraft.
A similar dynamic exists in Europe. Agreements for EU-China routes are also in place. European carriers benefit from routes to China as does Airbus, and the Chinese are investing in European aviation. And then there’s COMAC (the Commercial Aircraft Corporation of China), but all that is an article for another time.
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Photo credit: An Air China plane. 145539