United States, China expand air services

by Canadian Shipper

U.S. Transportation Secretary Norman Y. Mineta has announced a landmark air services agreement between the United States and China that will more than double the number of U.S. airlines that may serve China and will permit a nearly five-fold increase in weekly flights between the two countries over the next six years. 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 agreement was reached in Washington, D.C. after four rounds of talks starting last February.

"This agreement recognizes the critical role of commercial aviation in the rapidly growing U.S.-China trade relationship," Secretary Mineta said. "This agreement represents a giant step forward in creating an international air transportation system that meets the needs of the new global marketplace."

Secretary Mineta noted 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 United States’ fastest-growing export market.

"This important agreement demonstrates the administration’s focus on achieving real results in opening the Chinese market to bring benefits to American workers, businesses and consumers," Secretary Mineta said.

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.

Today’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. United Airlines, Northwest Airlines, Federal Express and United Parcel Service currently serve China.

The 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. A total of 14 of these flights will be available for new U.S. passenger services later this year.

The two sides also agreed to allow each country’s carriers to serve any city in the other country. Currently, 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 code-sharing between U.S. and Chinese airlines, thus expanding on the current agreement, which allows code-sharing only to a limited number of cities.

The 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.

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.

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