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China, US to Expand Air Services

The newly signed Sino-US agreement on expanding air services between the two countries has intensified competition for the nation's civil aviation market.

United Airlines announced on Friday that it has been awarded the right to operate daily non-stop flights between Shanghai and Chicago as of November 1.

The inaugural flight will lift off from Shanghai's Pudong International Airport and the tickets are already on sale for the new daily service, a press release said.

With the new route, United Airlines will offer 28 non-stop flights per week between China and the United States.

At the same time, FedEx Express said it has applied under the new agreement to add 18 new weekly cargo flights from the United States to China, Associated Press reported.

United Parcel Service of America (UPS) also filed an application to the US Department of Transportation to establish a cargo hub in Shanghai, sources from UPS said.

Compared with US airlines who look to seek a lion's share of the big aviation market, domestic airlines seem to be slow in responding to the "apparent opportunities" that the agreement offers.

According to the agreement, the number of weekly flights between the two countries will increase nearly five times -- from the current limit of 54 weekly round trip flights to 249 weekly round trip flights -- within six years.

It also allows five additional airlines from each country to serve the US-China market.

Insiders say the US airlines might benefit more from the new agreement than their Chinese counterparts since the latter do not have enough transport capacity to take advantage of the opportunities the deal offers.

Currently, domestic airlines can only handle 80 per cent of the approved flights between China and the United States while their US counterparts are looking to increase flights to match their transport capacity, Jiang Yong, an expert with the China Institute of Contemporary International Relations, told Beijing Business Today.

"Although the agreement is based on a win-win principle, the US side tends to be in a more beneficial position," he was quoted as saying.

The situation will last for a certain period and will not be easily changed, he added.

In a short period, the beneficiaries of the agreement will be besides US airlines airports in the two countries because the number of planes landing and taking off will be on the rise, the expert said.

"Domestic airlines will have to reorganize their resources to meet the challenge of fierce competitions," Jiang said.

However, some experts are optimistic about the signing of the agreement.

"In the long run, the introduction of competition from foreign airlines will help break the monopoly of the nation's civil aviation industry and step up the reforms of the sector," said Huang Taiyan at the School of Economics at Renmin University of China.

In fact, domestic airlines are working to improve their competitive abilities by increasing air fleets.

Air China Cargo Co has ordered two Boeing 747-400 Freighters worth a total of about US$400 million at list prices, sources from Boeing Co said.

The planes will be used on the carrier's routes between China and North America. The first is to be delivered in November 2005 and the other in March 2006.

One month ago, China Eastern Airlines signed an memorandum with Air Bus on booking 20 A330-300 passenger jets.

China Southern Airlines also was reported to have invested 10 billion yuan (US$ 1.2 billion) to purchase planes.

Insiders say the total number of planes that domestic airlines will book within the year will amount to more than 180.

(China Daily July 31, 2004)

China, US Reach Deal to Expand Aviation Services
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