Posts Tagged ‘asia’

The Department of Transportation has awarded new China route authority (see my earlier post on this), and all the major airline applicants took home a prize. Delta goes first, with immediate approval for Atlanta-Shanghai. The 2008 route is for Guangzhou only, and only United submitted a bid, for service from San Francisco. Finally, in 2009, US Airways will begin serving Philadelphia-Beijing, Northwest will fly Detroit-Shanghai, American will add Chicago-Beijing, and Continental will launch Newark-Shanghai service.

What’s too bad about this is that there is so much pent-up demand for China flights stymied by trade restrictions and tight control. Chinese airlines won’t even use all their allocated routes, but U.S. carriers can’t step in and take them over. Hopefully, recognition of this demand will stimulate movement toward an open skies agreement with China.

What’s great about this is the increased connectivity. By 2009, virtually every U.S. airport with commercial service will have one-stop access to China. This is an impressive gain since deregulation, when Pan Am and Northwest Orient dominated Asia routes (and often flew through intermediate gateways like Honolulu, Anchorage, and Seattle), and especially with respect to service to nonstop service to China itself, which was very limited and did not begin until the 1980s. The remarkable expansion of accessible China service to almost everywhere in the United States is something to applaud.

Delta, United get first crack at new China routes [USA Today via Today in the Sky]

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One of the media’s tropes is the battle royal between Boeing and Airbus, with the two companies as respective proxies for the United States and Europe. This is really no more than a trope, as both companies have been making their operations more international. The new Boeing 787 is really only American-assembled, not American-made–its parts are produced all over the world and shipped to Everett, Wash., for assembly.

Boeing has announced that China is now its largest supplier, with over $2.5 billion in contracts on all Boeing models. This is a sign of healthy trade interaction. When China’s state-owned aerospace companies start producing “homegrown” Chinese jetliners, one hopes that they will have learned a lesson about the value of international business cooperation and not follow the nationalistic path they seem inclined to.

China Now Largest Foreign Parts Supplier for Boeing [Aero-News.Net]

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As the BRICs develop their aerospace industries, they will decide whether they will participate in the international trading system or sell to a bloc of client states. Unfortunately, Russia seems to be returning to familiar paths as it attempts to produce 4,500 aircraft by 2025. Russia’s state-owned UABC is selling several Tupolev 204s to the Islamic Republic’s state-owned Iran Air. U.S. and European sanctions on Iran prevent the airline from buying the spare parts needed to maintain its Boeing and Airbus fleets. The sanctions are in place to pressure Iran to drop its nuclear program.

By constricting the Iranian economy, the West may persuade the regime in Tehran to give up its expensive nuclear ambitions and open up to true wealth. Russia’s decision to sell to Iran–not only airplanes–undoes that work. Russia is expressing its disdain for the multilateral trading system and bucking up a state sponsor of terrorism, a force for regional instability, and one of its old Cold War clients.

Russia is allowing its need for an outlet for production of new jets to supersede its interest in a stable regional neighbor. Moscow’s course, while it may bring good business in some quarters, indicates the path Russian aerospace and commerce in general will take in coming years.

Iran Turns to Russia for Airliners [AP]

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Per an earlier post, the Chinese aviation sector–and, by extension, Chinese travelers–are already beginning to experience the consequences of the central regulator’s decision to cut back on growth. The burden will fall most on low-cost carriers, stunting increased access to travel for the middle-income burgher class just beginning to emerge in China.

LCCs, new entrants feel effects of CAAC decision to limit growth [ATW Online]

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“Officials at Nepal’s state-run airline have sacrificed two goats to appease Akash Bhairab, the Hindu sky god, following technical problems with one of its Boeing 757 aircraft, the carrier said Tuesday,” according to Reuters.

The plane is now back in service.

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China’s booming with a 10 percent growth rate, but there’s one area of the economy that’s been put on hold: aviation. China’s airline sector is growing at 16 percent per year. New airlines are sprouting up, and demand is growing, especially in advance of the 2008 Olympics. The airline sector is growing faster, the main aviation authority CAAC says, than it can safely accommodate. Beijing’s main airport is too crowded, the air traffic control system cannot keep up with the growth, and there are too few qualified technical air traffic control personnel and pilots.

So CAAC is taking drastic measures: a ban on new airline start-ups until 2010 and massive capacity cuts at Beijing Capital Airport. These measures will certainly crimp the industry and drive up fares, as many new airlines are low-fare carriers. The Chinese situation is a more severe parallel of the U.S. situation, in which the government agency overseeing air safety cannot keep up with demand for growth. And so, in both China and the United States, government failure to keep up with their dynamic aviation markets has adverse consequences for travelers.

China to cut domestic flights, ban new airlines [MSNBC]

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While writing the post below, I was amused by a quotation in one of the linked articles:

While American airlines have been focusing more on international service and already are on the PR offensive in an attempt to win the extra routes to China, Chinese carriers are equating strength with domestic market share. They commonly launch fare wars in order to attract passengers, and industry analysts are concerned this tactic may be used to gain a competitive edge in the expanded US-China market. As US carriers aim to improve long-haul service, Chinese airlines are engaged in “wasteful competition” that degrades collective profits, analysts have said. (emphasis added)

Oh, the horrors! Competition! Airlines not behaving like members of a cartel! The degrading of “collective profits!” Analysts concerned that industry players may engage in the “tactic” of competitive behavior!

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