U.S./China Open Skies a Long Way Off

Last week Reuters reported that the United States and China held exploratory talks in May about revising the countries' existing bilateral air services agreement. The report indicates that no changes are imminent, formal negotiations will not begin until certain preconditions are met, and significant liberalization does not appear to be under discussion. The report quotes a Chinese official as being more interested in opening markets than in prior years, but that appears to be primarily motivated by a concern that the U.S. and Chinese passenger carriers are approaching the maximum number of weekly flights permitted under the current agreement between the U.S. and Beijing, Shanghai, and Guangzhou (160 round-trip flights for the U.S. carriers, 160 for the Chinese). The reported possibility of adding flights to and from those three major cities while decreasing the number of flights permitted to smaller markets is hardly indicative of a philosophical shift toward liberalization. The U.S., for its part, seems to be willing to play hardball as it is refusing to enter formal negotiations to revise the air services agreement until China addresses U.S. concerns over its slot allocation process at major airports, indicating that adding flights is a greater priority for the Chinese carriers than their U.S. counterparts.