U.S. airlines say they cannot afford to fly new routes or maintain all flights to China and other countries that restrict access, but they still want to keep their rights to serve those destinations.

Carriers asked the Bush administration to preserve rights for two years, an unusually long time, while they scramble to reverse a financial nose dive blamed on expensive fuel prices.

The carriers wrote in a joint application to defer service: ‘All U.S. airlines are being forced to re-evaluate the flights they offer to avert financial catastrophe.’

American Airlines; Delta ; United Airlines; US Airways; Continental Airlines; and Northwest Airlines expect a decision soon from the Transportation Department.

Privately held Spirit Airlines called the proposal an anti-competitive effort by bigger rivals to ‘deep-freeze’ valuable routes while slashing other service.

The latest request, if granted, would represent one of the only government steps to assist airlines during the current downturn, which some analysts predict could be worse than the last one from 2002-06 when four big airlines went bankrupt.

Andrew Steinberg, an attorney with Jones Day and a former senior U.S. official on international aviation matters, said the industry is ‘clearly in financial extremis’ and said the government ‘has to recognize’ airlines cannot fulfill all of their overseas plans because fuel is so expensive.

He said, ‘I think it’s a shame because international service is where the profits have been and where the growth is.’

U.S. airlines are on track to pay more than $61 billion for fuel this year, up $20 billion over last year.

Airlines did not specify where they want to halt or slow service but some have said individually that China routes are too costly.
Source: Reuters

The price of oil is going to change the aviation scene. At the moment it is about $130 a barrel. If it goes up much more — and all bets are it will — then a lot of el cheapo airlines will go down the drain and the ultra-cheap flights we have become used to will become a thing of the past.

If the price reaches $200 a barrel — and there are many that believe it will — it becomes crisis time for the airlines as well as for a lot of other industries.

The only side benefit that one can see is that the popularity of the daft, over-large passenger SUV’s will disappear like the summer snow.

The first sign of reactions to these problems comes with US Airways asking to delay the start of its first service to China for one year due to fuel price pressures.

Scott Kirby, the airline’s president, said in a memo to employees, wote, ‘At today’s prices, the fuel cost alone of running this single flight would be more than $90 million a year, about $40 million higher than the estimates we made when we filed for the route.’ As fuel is now about 30-40% of the cost of flying you can see how the price of oil can affect ticket prices directly.

US Airways said it asked the U.S. Transportation Department to let it begin its Philadelphia-Beijing service in the spring of 2010, instead of the spring of 2009.

Other U.S. carriers, including United Airlines and Northwest Airlines have recently sought to scale back passenger and cargo routes respectively to China due to fuel prices. Both have long established routes to Asia, and Northwest is adding a China passenger flight from Seattle.

Now United Airlines has applied for a similar delay. United, was scheduled to start its flights in June but now plans to postpone the start until June 2009. Robin Urbanski, speaking for the Chicago-based carrier was scaling back plans for the San Francisco to Guangzhou route because it did not have ’strong enough economics’ to offset higher fuel costs.

Closer to home Cathay Pacific Airways is considering cutting money-losing routes and retiring less fuel-efficient planes as fuel costs surge.

Cathay Chief Executive Officer Tony Tyler in an internal newsletter said the carrier will have to ‘reduce or eliminate routes that are draining cash,’ and reallocate capacity to its ’strongest most profitable markets.’

Cathay may face increasing competition from Taiwanese rivals on the Hong Kong-Taiwan route after direct air links between the Chinese mainland and Taiwan are established as early as August. The route is one of its most profitable because of the large number of Taiwanese travelers to the mainland who change flights in Hong Kong under current restrictions, the newspaper said.

It all depends on the price of oil. If it goes over $200 a barrel this year — bear in mind it is already over $130 — then the effects will be dramatic and, at present, incalculable.

Another view of some of the problems airlines face is in China Economic Review under Going Dutch. To see this article click HERE.
Sources: Reuters and International Herald Tribune and Shanghai Daily.

US Airways has been awarded a license for a US-China air becoming the sixth US carrier to be granted the permit.

The Arizona-headquartered US Airways will be competing with American, Continental, Northwest, United and Delta Airlines.
And the competition will be tougher because the US Department of Transportation time also awarded additional US-China passenger flights to American Airlines, Continental Airlines and Northwest Airlines.

US Airways will fly between Philadelphia and Beijing, while American, Continental and Northwest each will use their new rights to add a daily flight to their existing US-China services.

American Airlines will begin a Chicago-Beijing service, while Continental will operate a new flight between Newark/New York and Shanghai, and Northwest will fly between Detroit and Shanghai.

This will all come into play relatively quickly and the number of daily flights between the United States and China will double over the next five years. The aim is to get to something like 23 passenger flights a day to China by 2012.

China is the fastest-growing aviation market in the world after passenger traffic hit 160 million in 2006, up 15% on the previous year.

CAAC estimates that passenger volumes will maintain double-digit growth up to 2010.
Source: People’s Daily Online

Li Jixiang, the chairman of Air China Chairman, said there is a need for the Chinese aviation industry to create ’super-carriers’ able to compete on a global level, and that his airline was up to the challenge.

The comment also leaves room for the flag carrier to further pursue a merger with China Eastern, a move earlier denied them, but one that Air China still hasn’t ruled out for further consideration.

In a sense it has already expanded through consolidation. On 28 October, 2002, Air China consolidated with China National Aviation Corporation and China Southwest Airlines. During 2004 as part of a consolidation of the Chinese aviation industry Air China absorbed Zhejiang Airlines (a subsidiary of CNAC).

Li Jixiang said, ‘Air China is still too small. To realize this super-carrier, Air China can do it; other airlines can also do it. Other airlines can also buy Air China — we welcome anyone to buy Air China shares. As long as China produces a super-carrier, I’ll be happy.’

Chairman Li brought up one option for growing as being small acquisitions as it has before in the bid to create the super-carrier. It will take a lot of acquisitions for it to be able to compare with, say, United Airlines with a 460-strong fleet compared to Air China’s 68.

Not helping as the delays by Boeing in the delivery of the 787 Dreamliner. The six month delays on initial deliveries could hinder the carrier’s planes for aggressive route developments to serve the Beijing Olympics.

The US-China air-service agreement allows for one additional passenger flight by an airline of each country in 2007 and 2008, four in 2009, three in 2010, and two each in 2011 and 2012.

The US Department of Transportation (DOT) has announced the recipients. Six of the seven applicant airlines received new route authority, doubling air services between the United States and China by 2010.

Delta will begin its first service to China from Atlanta to Shanghai on March 30.
United, already with the most flights between the US and China, will, as reported, begin service between San Francisco and Guangzhou early next year.
Northwest Airlines and China Southern Airlines will offer daily nonstop flights in 2009 between Detroit and China.
China Southern Airlines, the nation’s largest carrier with hostess in our illustration, will begin daily, nonstop flights between Detroit and Beijing. Flights are expected to begin in March 2009.
Chinese carriers Hainan Airlines and Shanghai Airlines both plan to begin service to the US next year. Hainan has applied for service between Beijing and Seattle and Shanghai Airlines has applied to connect Shanghai to both Los Angeles and Seattle.

Note that Chinese airlines have yet to use all of their allotted frequencies. According to the agreement, Chinese airlines are currently allowed ten frequencies to the US but as of this month only have six scheduled flights.
Sources: Michigan Live and Asia Times