Monday, March 8, 2010

Eastern Airlines Moving Closer to Alliance Membership

According to a story out yesterday, China Eastern--one of China's three largest carriers--will soon announce its decision to join one of the three major worldwide alliances.  See Patricia Jiayi Ho, China Eastern to Join Alliance, Wall St. J., Mar. 7, 2010 (available here).  China's other two major airlines, Air China and China Southern, are already members of the Star Alliance and SkyTeam, respectively.  That would seem to make the oneworld Alliance the obvious choice, though China Eastern is remaining tight-lipped pending its final decision.

Regardless of its decision, for the time being China Eastern's alliance membership will be limited to a codeshare relationship.  China has yet to finalize an open skies agreement with the United States, thus leaving its carriers ineligible to deepen their alliance relationships with U.S. partners to include close coordination on routes, pricing, and revenue sharing under a grant of antitrust immunity from the Department of Transportation.  Under longstanding DOT practice, such grants are only given to carriers from States which have signed a liberal bilateral with the U.S.  While the most recent amendment to the U.S./China air services agreement requires the parties "to [begin] negotiat[ing] an agreement and timetable for the full liberalization of their bilateral air transport market" by March 25 of this year.  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. 5 (July 9, 2007) (available here).

At this point it remains too early to tell what (if any) progress will be made in future U.S./China aviation talks.  Undoubtedly, China will be paying close attention to both ANA and JAL's ongoing antitrust immunity proceedings before the DOT.  If both airlines are able to win immunity for their joint ventures with U.S. partners, it may help spur the Chinese Government to negotiate a new bilateral that provides its own carriers the opportunity to forge comprehensive alliance relationships.  That assumes, of course, that China is willing to place the commercial interests of its carriers before any nationalistic desire to protect its market from additional foreign competition.

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