EuroWire May 2017

Transatlantic Cable

viable slots in China in a timely manner deprives them of their bilaterally conferred rights, and harms the interests of the USA and the travelling public. Teaming up with China Southern would be “an alternative way to skin this cat” for American, wrote Mr Fickling. The Texas-based airline – which has petitioned the USA Department of Transport for extra time to start services on one of the last available routes from Los Angeles to Beijing – cannot increase its penetration of China by way of its own equipment. But a code-share agreement with a Chinese carrier would allow it to buy seats on a partner’s plane and o er “virtual” capacity instead. † The investment in China Southern could also be a rst step to bigger things for American. According to Bloomberg , CEO Doug Parker thus raises the odds of getting the Guangzhou-based carrier to join American in Oneworld, the third-largest global airline alliance in terms of passengers. This would mean access to “the real prize” of coordinating code-shares, frequent- ier programmes and airport schedules. China Southern and its Shanghai-based rival China Eastern Airlines are both partners of Delta in the Sky Team alliance, the world’s largest. But Delta has favoured Shanghai as its hub for connections to the rest of China. So, noted Mr Fickling, with its Guangzhou connection “American [is apparently] pushing on an open door in attempting to make itself China Southern’s new best friend.” In a 24 th March interview with Bloomberg ’s Justin Bachman, the CEO of the US Travel Association (USTA) commented that “travel is a very fragile thing, and perception is a factor.” To Roger Dow, a former Marriott International Inc executive, actions taken during the young presidency of Donald J Trump have already exacerbated that fragility and altered perceptions of America as an attractive and hospitable destination for the visitor. (“US Travel Industry Fears a ‘Lost Decade’ Under Trump,” 27 th March) Mr Dow does not expect arrivals to decline as much as after the terrorist attacks of 2001 in New York City – at least not yet. For now, he does expect a dip of as much as four per cent. “We haven’t seen the big damage yet,” he told Mr Bachman. “What we’re getting is the noise level.” Bans, detentions, vetting and restrictions on electronic devices imperil the $250 billion USA travel industry

The air travel market

A small but strategic Chinese investment could help American Airlines to a lucrative trans-Paci c future

Growth in air tra c between China and the USA is likely to be approximately zero for some time. But according to Sydney, Australia-based Bloomberg contributor David Fickling, “wise airline executives tend to think in decades, rather than years.” As forecast by Boeing Co (Chicago), trans-Paci c will be almost as large a market as north Atlantic in 2035. There will also, by that time, be more domestic air tra c in China than in the USA, a prospect which dominates US airline executives’ thinking and leads them to this question: how do you get a foot in the world’s soon-to-be-biggest aviation market in the face of o cial intransigence from its government? Mr Fickling reported that American Airlines Group thinks it has found a way. People familiar with the matter told Bloomberg News that the world’s biggest airline company is in talks to take a stake of about $200 million in China Southern Airlines Co via a private placement. (“American’s Southern Comfort in China,” 22 nd March) Barely enough to cover the cost of a single Boeing 787, that sum is tri ing to a carrier that posted more than $40 billion in revenue over the previous year. With China Southern worth about $10 billion, $200 million would barely net American a two per cent stake. It is “in the high-stakes diplomacy of international aviation” that Bloomberg sees the logic of the purchase. ‘Virtual’ capacity/real tickets As a loosening of visa restrictions between China and the USA spurs travel demand, American has been trying to catch up to Delta and Continental on trans-Paci c routes. But airlines in both the USA and China are already stymied by hard caps on ight frequency. There just are not enough slots available under a 2007 air transport agreement between the two countries to enable the companies to meet the forecast demand. Mr Fickling bluntly stated the generally acknowledged view that the di culties USA carriers experience in navigating China’s allocation system for airport slots place them at a substantial disadvantage to their Chinese counterparts. It holds that the frequent inability of USA carriers to obtain commercially

Image: www.bigstockphoto.com Photographer Zsolt Ercsel

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May 2017