Friday, February 26, 2010

China Eastern Looking for an Alliance

Could the U.S. see open skies with China in the near future? There is news out that China Eastern is in talks with the oneworld, SkyTeam, and Star alliances about a possible transpacific link-up. See China Eastern in Talks with Three Airline Alliances, Trading Mkts., Feb. 26, 2010 (available here). While China Eastern could forge a codesharing relationship with one of the alliances without an open skies deal between the U.S. and China in place, it would be unable to reap the full benefits of alliance integration unless it first received antitrust immunity from the Department of Transportation.

For nearly two decades now, the DOT has insisted that a liberal bilateral air services agreement be in place with a foreign carrier’s home State before granting it antitrust immunity to cooperate on scheduling, pricing, and revenue sharing with any U.S. airlines. Would the Department be willing to soften its stance in exchange for greater (though not unrestricted) traffic rights into China? The recently signed U.S./Japan Memorandum of Understanding is purportedly an open skies accord, though the agreement still allows Japan to keep tight control over slot allocation at its busiest airports. Some critics have charged the deal is “sub-open skies,” yet most expect the DOT will still dispense antitrust immunity to Japanese carriers JAL and ANA as part of airlines’ plans to deepen their alliance arrangements with oneworld and Star, respectively.

Currently the U.S. has a restrictive bilateral in place with China, though the agreement does provide for a steady increase in flight frequencies through 2011. See Protocol to Amend the Agreement Between the Government of the United States of America and the People’s Republic of China Relating to Air Transport, art. 2 (July 9, 2007) (available here). The agreement also states that the two parties will enter into negotiations for a new air services agreement no later than March 25, 2010. See id. art. 5.

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