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Airlines vie for profitable China route

Marketplace Staff Jan 5, 2007

KAI RYSSDAL: The capitalist world is beating a path to China’s door. But it’s having a tough time booking a flight. There’s booming demand for seats to Beijing and Shanghai. There just aren’t enough of them. The Chinese government has approved one additional route from the States. And the Department of Transportation is about to give it to one lucky U.S. airline. Ramy Inocencio explains a lot’s riding on thin air.

RAMY INOCENCIO: An air ticket to China is a rare commodity. The simple reason is the country rations the routes it grants to foreign airlines in order to protect its own carriers. So, when a new direct U.S.-to-China air route was opened for bidding, U.S. airlines lined up.

Airline analyst Darryl Jenkins, says it’s a potentially huge cash cow.

DARYL JENKINS: The demand for travel to China is growing by leaps and bounds. There are more people willing to pay very, very high fares than there are seats right now.

A first-class or business round-trip ticket can run as high as $12,000. Prices like that could add as much as $150 million annually to the bottom line of the winning bidder. In the running are United, Continental, Northwest and American Airlines.


Flying highest, says Jenkins, is United with its proposal to connect Washington, D.C., to Beijing.

JENKINS: Anytime you hook up both capitals, that generates an incredible amount of public interest.

The capital-to-capital connection will likely be a big factor: 28 countries in the world have nonstop service from their capital to Beijing. So far the U.S. doesn’t.

United’s Senior Vice President Mike Whitaker plays up the trade benefits of a D.C. to Bejing connection.

MIKE WHITAKER: Washington has over a thousand high-tech companies. Most of those you can expect are doing business in China.

But Continental also a strong contender, with its Newark to Shanghai proposal. The company only has a few routes in Asia which may work in its favor, says Jenkins, because the D.O.T. likes to keep the field competitive.

JENKINS: Certainly if I were Continental and I were lobbying on their behalf, this is the thing that I would be bringing up.

Jenkins’ pick for a third-place finish is Northwest and its Detroit to Shanghai route with American Airlines dead last. The company had asked its pilots to add an extra hour flying time for a direct Dallas-Beijing flight but couldn’t clinch a deal. The unfortunate result: a stopover on the way.

JENKINS: When everybody else is direct and you have a one-stop going over, your chances decrease pretty, pretty fast.

The new flights to China take to the skies on March 25th. And the Chinese will open only two more new routes over the next four years, despite ever-rising demand. That means ticket supply will continue to be limited, and the prices sky high.

In Washington, I’m Ramy Inocencio for Marketplace.

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