US Airlines Offer Bids in Fight for China Flights

Several major US Airlines offered bids a week or so ago for route authorities to China. The DOT will award up to six route authorities over the next two years, and the rules and process for which airlines can bid for which are obtuse to say the least. The most sought-after one enabes carriers to start service in 2009. American has applied for a route between Chicago O'Hare and Beijing. The airline already operates a route between Chicago and Shanghai which has been very successful for the airline. If successful, this route would be a major boon to the city of Chicago, which currently has no nonstop link with Beijing, and could use one as America's third-largest city. The route would likely be quite popular, given the amount of business traffic between the two cities, as well as the connecting traffic that American could generate from points in the Midwest and the Eastern US. Chicago is perhaps America's most important air traffic hub, and facilitates a great many connection opportunites. But while American's Chicago-Beijing route has a strong chance, I think Continental has an even better chance with its Newark-Shanghai application. The New York-Shanghai market is critical for business travelers, yet it has no nonstop service on a US Carrier. Continental applied for the route last year, but lost out to United's Washington DC-Beijing application. This time, I think Continental has a much better shot because the market is so underserved, yet so vital.

Another prominent route application has been filed by Delta. Delta wants to fly between Atlanta and both Beijing and Shanghai. Delta has previously applied for rights to fly between Atlanta and Shanghai, but the airline's application has been rejected. This time around, the airline has a much better shot on the Shanghai route, since it will be bidding for a route authority that's designated for carriers that don't yet serve China. However, the Beijing route will face much tougher competition in 2009. The economy has been booming in the South, with a great deal of new foreign (and especially Asian) investment, most recently with the announcement of a new manufacturing plant by Honda in North Carolina for its HondaJet aircraft. The DOT is very interested in adding new flights to regions which lack China service, and the South is a major underserved area. While Delta will have a tough fight to convince the DOT that it should be given route authority for China, it has a good shot at winning the Beijing rights. I think that Delta's odds are about on par with Continental's, and better than those of any other carrier for the 2009 slot. There's also a good article about Delta's bid in the Atlanta Journal-Constitution. 

Other airlines applying for the route authority include US Airways, which has applied for a Philadelphia-Beijing flight. While the DOT looks favorably on carriers which currently don't operate flights to China, US Airways has some very tough competition. Philadelphia is a very important business center, and certainly needs a nonstop China flight, as the city lacks nonstop service to China on any airline, but I don't think the route authority now up for grabs in 2009 will belong to US Airways. Philadelphia needs to develop its Asian market before it gets China service (the city currently has no nonstop service to Asia). Also, Philadelphia offers limited connection opportunities to points east (primarily for geographic reasons) and connections to the Northeast might be better faciliated by a flight from New York or Boston. Philadelphia has a shot, but the city may have to wait a few years.

United wants to add new service between Los Angeles and Shanghai starting in 2009, the first on a US carrier. While this service will eventually get added, given that this market is already served by a foreign carrier, and that United recently won a route authority, I don't think this bid is as likely as most others. However, United is also bidding for an authority to start service between San Francisco and Guangzhou starting in 2008. I think this one is much more likely, since United claims that San Francisco is the metro area with the most traffic to Guangzhou that lacks nonstop service to the city. Moreover, few other carriers are seriously looking at serving markets outside of Beijing and Shanghai, and adding nonstop links to additional points in China might be very beneficial to increasing US-China ties.

Northwest is also looking for rights to serve Beijing and Shanghai nonstop from Detroit. Northwest already has considerable service to China (for a US carrier) through its Tokyo hub, and service through Detroit would greatly expand the number of single-connection markets from which Northwest could offer China service. I think these bids are less likely, because although Northwest has experience flying to China, these routes simply aren't what's needed right now. The Midwest is receiving some new foreign investment and could use the flights, but Chicago has already positioned itself as the Midwest's Asian gateway, and since the city offers more connections to more places, it would make more sense for Chicago to get the route. However, it's very unclear what will happen as the DOT starts to make its China decisions. The DOT could be strongly influenced by politicians backing the China campaigns of various airlines, and political influence and hand-wringing may have more to do with an airline's success than the route's merit. However, in the past, the DOT has done a satisfactory job of keeping politics out of the decision-making process, and I suspect that the routes with the most potential for success will be the ones awarded.

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