American, Continental win China route

/ Source: The Associated Press

American Airlines and Continental Airlines Tuesday won tentative government approval to begin nonstop passenger service from the United States to China, defeating Delta Air Lines Inc. for the right to serve a growing travel market.

American, a unit of AMR Corp., said it would begin flying from Chicago to Shanghai in April 2006, while Continental Airlines Inc. said it would fly between Newark, N.J., and Beijing but did not announce a date.

UAL Corp.'s United Airlines and Northwest Airlines Corp. already fly between the two countries.

The announcements by American and Continental came after the Department of Transportation proposed granting them authority for the flights. The agency also awarded new cargo service to four carriers: FedEx Corp., Northwest Airlines Corp., Polar Air Cargo and UPS Inc.

The agency said it would issue a final decision on the awards after reviewing comments on its proposals. The comments are due March 4.

China and the United States signed an aviation agreement last July to expand service between the two countries and drop most restrictions on each other's airlines. The pact increases the numbers of passenger and cargo flights allowed by Chinese and U.S. carriers in stages over the next six years, rising from the current 54 per week to 249. The deal is intended to ease shortages of seats that have prompted complaints from tourists and business travelers.

Other carriers that applied to become new entrants in the U.S.-China passenger market in either 2005 or 2006 were Delta, Hawaiian Airlines and North American Airlines. Evergreen International Airlines, Gemini Air Cargo and World Airways applied for the all-cargo flights.

American's chairman and chief executive, Gerard J. Arpey, expressed gratitude after the Fort Worth-based carrier was picked over the other carriers.

"For more than five years, we have wanted to fly to China and have believed that American's service will provide the strongest possible competition in this growing marketplace," Arpey said in a statement. "This award for new service starting in 2006 will be a big breakthrough for us in the Asian market."

American had lined up significant support in Congress, especially among lawmakers from Texas and Illinois. The flights will link China to Chicago's O'Hare Airport.

Larry Kellner, Continental's chairman and CEO, said nonstop flights to Beijing from the New York area would be a boon to business travelers. Continental launched daily service between Newark and Hong Kong in March 2001.

Delta was "bitterly disappointed" the agency approved more China flights from Chicago but rejected Delta's proposal for Atlanta service, spokesman Anthony Black said. Hawaiian spokesman Keoni Wagner said "we're disappointed, but China remains an aspiration of ours."

Dan McKinnon, president of privately-held North American, said his airline was the only low-cost carrier in the bidding but that regulators seemed more concerned with American's ability to offer competition against United on the Chicago-China route.

Passenger traffic between China and the United States grew 23 percent a year from 1993 to 2002 and passed 700,000 yearly travelers in the 12-months ended March 2004, the Transportation Department said.

The department said the most serious shortcoming in service was in New York, explaining why it chose Continental.