Long Road to China: Getting Service to Shanghai Wasn’t Easy for American
By Trebor Banstetter, Fort Worth Star-Telegram, Texas
Apr. 2–American Airlines fulfills a 14-year quest today when its first nonstop flight from the United States to China takes off.
The flight, which departs from Chicago O’Hare Airport this morning and arrives at Pudong International Airport in Shanghai 14 hours later, is the result of years of negotiations between the two countries and intense lobbying of Chinese and American government officials by American executives.
It is also a crucial component of American’s new business strategy, which makes international service — particularly to Asia — a top priority.
“This is a market with really incredible growth prospects,” said Henry Joyner, American’s senior vice president for planning. “We just have to be there.”
Early bookings have been strong, Joyner said, and the airline predicts that flights will be 86 percent full on average this year. American also projects robust cargo service, with an estimated 44,100 pounds of freight and mail being carried to Shanghai every day.
“Right now, China and India are the fastest-growing business markets in the world,” said Athar Khan, the Hong Kong-based managing director of American’s Asia-Pacific region. “If we don’t have those countries in our network, our key business customers are missing something that’s hugely important.”
But adding the service to Shanghai was no easy matter. American has had offices in China since 1992, where employees lobbied government officials to allow flights and negotiated partnerships with Chinese carriers.
“It’s been a very long process,” Khan acknowledged.
For Joyner, today’s flight is a particularly meaningful victory. The 51-year-old executive studied Chinese history and Mandarin as a student at the University of Chicago before entering business school. He has a master’s degree in Far Eastern languages and civilization.
“At one time, I thought I was going to spend my life as a professor of Chinese history,” he said. “So this is something I’ve been interested in for a long time.”
American hopes that the service is just the beginning of additional growth in Asia. The airline plans to lobby for more flight frequencies and new cities as the treaty allows more growth over the next few years.
“We’re very hopeful the U.S. government and the Chinese government realize that we need more access,” Khan said.
One possibility is a nonstop flight from Dallas/Fort Worth Airport, Joyner said.
“D/FW is certainly going to be a very important gateway,” he said.
Long history
For nearly 60 years, only two U.S. carriers were allowed to land in China — Northwest Airlines and Pan American World Airways, which launched service in its famous Martin M-130 “China Clipper.”
In 1985, United Airlines bought Pan Am’s China routes when that airline was restructuring.
Despite lobbying by American and other carriers eager to tap into the market, new service did not become available until 1999, when the United States and China agreed to allow another U.S. carrier into the market. UPS ultimately won that service and launched cargo flights from Newark, N.J., and Ontario, Calif., to Beijing and Shanghai in 2001.
In 2004, another round of negotiations led to the largest expansion in history. Five new airlines were allowed to begin service by 2010, with 195 new weekly flights to China. That more than tripled the number of flights U.S. carriers were operating between the two countries.
The breakthrough came after American executives, including Gerard Arpey, the carrier’s chief executive, had personally lobbied officials with the Civil Aviation Administration of China and brought Chinese government officials to Dallas/Fort Worth Airport.
Joyner, who has worked for American since 1980, recalled that he and Arpey dined with some of the agency’s top officers in Beijing and listened to the Chinese officials describe a view of their aviation needs “that was remarkably aligned with our vision.”
At that point, he said, “I knew some exciting things were going to happen.”
But even after the treaty’s ratification, the airline still needed to win approval from the U.S. Transportation Department for the flights. Other airlines, including Continental Airlines and Delta Air Lines, requested new flights, and Northwest and United wanted to expand their service.
In their application, American executives argued that their hub in Chicago could draw passengers from across the nation, and that being one of the only large carriers not in bankruptcy meant that the route would be stable. Additionally, an existing partnership with China Eastern Airlines would allow American to connect passengers to cities far beyond Shanghai.
The airline also mounted a huge public support campaign, winning letters of endorsement from 26 U.S. senators, 78 House members, seven governors, 25 mayors and 38 airports. Several thousand American employees also sent letters and e-mails to the Transportation Department in support of the airline.
In early 2005, the decision was made. Houston-based Continental Airlines won the first flight with approval to begin service from Newark to Beijing in March 2005.
But American was next, gaining approval to begin Chicago-to-Shanghai service in April 2006.
“The selection of American would provide the greatest public benefit,” the department wrote in its order, “because its proposed Chicago-Shanghai service would provide the greatest competitive challenge to Northwest and United.”
American’s primary competition will be with United, which began flying from Chicago to Shanghai in 2004. The rivalry is likely to be heated, as both carriers operate hubs at O’Hare and plan to connect passengers from across the country.
Strategic cornerstone
The new service came as the major carriers, including American, began adjusting their schedules to focus on international travel.
Unlike domestic routes, overseas flights are less vulnerable to competition from discount carriers, likes Dallas-based Southwest Airlines. And business travelers are still willing to pay a premium for first-class service and flexible, refundable fares to foreign cities.
Of those international markets, none is more coveted than Asia, where travel demand has been booming. From 2003 to 2005, passenger traffic to the region grew by nearly 16 percent, according to the Air Transport Association.
“This is the plum market right now,” said airline consultant Alan Sbarra of Roach and Sbarra Airline Consulting. “Asia is where all the economic growth is.”
For American, Asia has long been a weak spot in its global network, with Japan the only nonstop destination from the United States.
With the Shanghai service, as well as new nonstop flights to Delhi, India, American hopes to attract more of the lucrative business travelers flocking to the region. American is sending its own delegation on the inaugural flight, including Joyner, who will give a speech to the American Chamber of Commerce in Shanghai later in the week.
“This is also significant for the Chinese government,” said Victor Lee, American’s Shanghai-based regional director for greater China. “We’re the world’s largest airline, and our service there is another symbol of the country’s growth.”
Service won’t be focused on just U.S. passengers. American sees an opportunity to attract China-based travelers as well.
“Chinese companies are still getting organized when it comes to business travel,” Lee said. “We’re trying to interact with them, get them interested in what we have to offer.”
The airline is also hoping to lure leisure travelers from both countries as U.S.-China tourism grows.
The service isn’t without risks, however.
In 2003, the outbreak of severe acute respiratory syndrome, or SARS, in Asia caused passenger traffic to the region to plummet. Traffic was down by as much as 40 percent, and both United and Northwest took significant hits to revenue.
But American executives hope that the long-term growth prospects of service to Asia outweigh the risks.
American has tapped its employees to help prepare for the service.
The carrier enlisted workers of Chinese and Asian descent to help prepare menus for the flights and adapt to the differences in Chinese culture. They helped craft a menu that includes sweet-and-sour sea bass with steamed rice, kung pao chicken with fried almonds, stir-fried noodles, carrots and peppers.
The airline has also deployed Mandarin-speaking employees in Chicago to assist with the inaugural flights, providing translation and assistance for Chinese passengers at the airport.
And other crew members have been preparing for months for the flight. Pilots, for example, had to complete special training for the so-called super-long-haul status of the flight.
In 2004, the airline negotiated special work rules and operating parameters, such as the size and makeup of the airplane crew, with the pilot and flight attendants unions.
“We’ve thrown everything we have into this, for a lot of years,” Joyner said. “It will be very satisfying when that first plane takes off.”
IN THE KNOW
China Travel Facts
20 million Chinese traveled abroad in 2003.
An estimated 100 million will be traveling overseas by 2020.
China will spend $17.4 billion during the next five years to improve airports.
In 2005, Chinese airlines carried 138 million passengers, up 16 percent from 2004.
Passenger and cargo traffic from China to the United States is expected to grow 14 percent annually through 2010.
Online exclusive
Today: Get a virtual view of American’s historic journey, and then track the flight in real time.
Monday: Read Trebor Banstetter’s in-flight diary when he touches down in Shanghai.
www.star-telegram.com
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Trebor Banstetter, (817) 390-7064 tbanstetter@star-telegram.com
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Copyright (c) 2006, Fort Worth Star-Telegram, Texas
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