release

 

BTC Supports American Airlines’ DFW-to-Beijing Application

RADNOR PA., October 31, 2006–The Business Travel Coalition (BTC) calls on the US DOT to fulfill an important commitment, and during the current US-China route authority case, award available frequencies to a smaller, newer entrant in the market. By doing so, DOT will give US businesses and consumers flying to China what they need most: increased airline competition, lower airfares, more choices and better service. In stark contrast, providing either of the long-entrenched, larger incumbent airlines additional frequencies would produce negative results for the flying public and contravene the understanding of all parties that this round of China route case awards would go to one of the newer entrants in the market.

“It is exceedingly important that new air service opportunities be used strategically to intensify competition in a marketplace long dominated by United and Northwest Airlines. Of the two newer entrants, American Airlines’ Dallas/Fort Worth International Airport-to-Beijing proposal holds the most promise of superior public benefits,” stated BTC chairman Kevin Mitchell.

In BTC’s view, the American Airlines’ proposal represents the best choice for DOT for three reasons:

  1. Increased Competition. The American proposal would increase its weekly frequencies to fourteen, sufficient to enable the kind of robust competition for connecting passengers that is the hallmark of the domestic US marketplace. American would offer 91 behind-DWF cities convenient access to Beijing. In stark contrast, United’s Dulles proposal merely duplicates its existing behind-Chicago network of cities, i.e. it offers zero additional competitive benefits; in fact, it detrimentally increases market concentration. Moreover, American offers 30 cities first-ever online single-connection service to Beijing. United offers virtually none.

  1. Regional Equity. Businesses and communities in the West, Midwest and Northeast all have service to China via Los Angeles, San Francisco, Minneapolis, Chicago, Detroit, Newark and JFK. The South has no regional gateway airport with service to China whatsoever. Not to correct this imbalance now would be unfair in the extreme.

  1. Foreign Policy Support. Some 108 million or 36 percent of Americans live in the South. By population, Texas is the second largest state and has an impressive $14 billion in annual trade with China. Florida, our fourth largest state, does $5 billion in trade, and is growing at 30 percent a year. It is strategically important to provide a transportation system to leverage this trade into closer economic and cultural ties that ultimately support our foreign policy objectives. United’s Dulles proposal is flawed in several respects. But at the top of the list, providing more convenient air service to diplomats is little more than a “nice-to-do” compared with the benefits of integrating our two countries’ economies.

By definition protective bilateral aviation agreements constrain competition enabling incumbent airlines to build unassailable competitive positions and providing some regions of the country, “the haves,” with economic benefits unavailable to other regions, “the have-nots.” The new US-China air services liberalization agreement reached in 2004 was hailed in large measure because the 20 year market domination of Northwest and United could finally be addressed bringing relief to high business airfares and new economic opportunity to regions of the country without convenient access to China. Awarding the 7 new frequencies to United, for example, would bring the market leader’s total weekly frequencies to 35, or 5 times the number held by either newer entrant Continental or American. Clearly, this is an unthinkable outcome.

In summary, DOT has a historic opportunity to strengthen competition and help lower airfares in the US-to-China market; to improve the economic well being of millions of Americans living in the South; and to leverage a route authority award to advance our nation’s foreign policy aspirations.

For more BTC China analysis please see http://businesstravelcoalition.com/issues/dot_2006_china_case.html.