US Government Claims That China Is Blocking US Airline Flights

The United States government has accused China of blocking US airlines from resuming flights to China. United and…

US Government Claims That China Is Blocking US Airline Flights

The United States government has accused China of blocking US airlines from resuming flights to China. United and Delta both want to restart flights to mainland China from June. However, both airlines have not had success at getting permission to restart the flights. So, on May 22nd, the Department of Transportation (DOT) ordered Chinese airlines to file their flight schedules.

Delta is one US airline seeking to resume services to China. Photo: Getty Images

The conflict over air services

In the order issued on May 22nd, the US Department of Transportation stated the following:

“By this Order, the U.S. Department of Transportation (the Department) is taking steps in response to the failure of the Government of the People’s Republic of China (China) to permit U.S. carriers to exercise the full extent of their bilateral right to conduct scheduled passenger air services to China.”

The US-China Civil Air Transport Agreement gives rights for airlines to fly between the two countries– with restrictions. It is not an Open Skies agreement that allows any airline to start up any flight between two points.

Since January, US airlines have drawn down service. At the start of 2020, US and Chinese carriers flew about 325 weekly flights between the two countries. By February, that was down to 20 weekly flights on four Chinese airlines. In mid-March, Chinese airlines increased this to 34 weekly flights. US airlines kept their China schedules suspended.

Chinese airlines
Chinese airlines have maintained service to the US. Photo: Getty Images

On March 26th, the Civil Aviation Authority of China (CAAC) issued an order that limited international air service. Chinese carriers could fly only one weekly scheduled passenger flight on one route to any country. Foreign airlines could maintain just one weekly flight on one route to China. For US airlines, such a schedule would be largely inefficient.

The CAAC went further to issue that Chinese and foreign carriers must use international passenger flight schedules from March 12th as a maximum limit for capacity, in terms of frequency of service, that the airlines maintain in any given international market until further notice. While Chinese airlines continued US flights, no US airlines were operating to Mainland China from the US.

Now, both United and Delta are seeking approval to resume service to China starting from June. However, the CAAC has not given any US airline the green light to launch flights between the two countries.

United wants to resume flights to several cities in China. Photo: Getty Images

So, now, the US DOT has required Air China, Beijing Capital Airlines, China Eastern Airlines, China Southern Airlines, Hainan Airlines, Sichuan Airlines, and Xiamen Airlines to file their flight schedules with the US Department of Transportation.

Once these schedules are filed, the DOT will review whether the flight schedules negatively impact public interest and go against the US-China Civil Air Transport Agreement.

American Airlines, Shanghai, Beijing
American Airlines plans on returning to China later this year. Photo: Getty Images

How will this turn out?

This is the first real step the DOT is taking as US airlines await any approval to start flights to China. What comes after this, however, depends on how the US government wants to handle the situation. In a worst-case scenario, both China and the US could restrict (or entirely block) flights between the two countries. However, this would be an extreme turn of events.

China Eastern Boeing 777
The main three Chinese airlines all partner with different US carriers. Photo: Getty Images

China is a lucrative market with plenty of healthy demand between the two countries. Restricting flights would be a huge detriment to tourist and business markets on both ends.

The best way out of this for both sides is to agree to a new set of services that benefits both US airlines and Chinese airlines. United is seeking the most robust China schedules of all US airlines. Meanwhile, Delta is seeking to serve Shanghai– its partner China Eastern’s hub. While neither side may get everything they want, compromise is the best way to avoid an international aviation standoff.

How do you think this situation will be resolved? Let us know in the comments!

Source : Simple Flying More   

What's Your Reaction?


Next Article

Saudi Sovereign Wealth Fund Has Bought A $700m Stake In Boeing

Last week, US regulatory filings showed that Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF) took…

Saudi Sovereign Wealth Fund Has Bought A $700m Stake In Boeing

Last week, US regulatory filings showed that Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF) took a $713.7 million stake in American planemaker Boeing. Hitting a peak value of $440 per share in March 2019, the stock took a hit due to the 737 MAX crisis but then plummeted with the onset of the COVID-19 pandemic.

Boeing’s share price is a fraction of what it was in early February. Photo: Getty Images

From the 737 MAX to COVID-19

Boeing’s monetary value as a company has taken a beating in recent months. The company’s current share price sits at about $138. This is just one-third of its value from 14 months ago when it hit a record high of $440.

Of course, two key factors have caused this dramatic fall in Boeing’s share price. Firstly, we had the 737 MAX crisis. As Boeing’s most popular commercial product was grounded and put under intense scrutiny, we saw the share price slide to as low as $335. Still, this was only a 25% dip at its worst. This is likely due to investor confidence stemming from Boeing’s wide range of other products in various sectors, including space and defense.

Furthermore, in terms of its commercial division, the 737 was just one model while the company was still offering 787s and the upcoming 777X. We can also consider that investors had a firm faith that the 737 MAX would recover and re-gain its certification in a reasonable amount of time.

mbs mohammad bin salman
Saudi Arabia has been a strategic partner for the United States in terms of regional (Middle East) security. Furthermore, the Saudi government is known to be a big customer of US defense products. Photo: Getty Images

Of course, the big reason why Boeing’s value is as low as it is right now is COVID-19. Around the beginning of March, the company’s share price took a dramatic freefall, going as low as $95 per share – a nearly 80% drop from its March 2019 high. It has recovered a little since then, but not by much. The current price reflects the fact that it will take quite some time for commercial aviation to recover.

A good deal?

Therefore, Saudi Arabia’s PIF probably sees Boeing as a good investment opportunity at its current value. With new leadership at Boeing and a pledge to address fundamental workplace issues, Boeing could come out of this a stronger company – although it may take a few years.

For any potential investor, a key question to ask during a time like this is “has the stock gone as low as it can go?” If investors think that the price has reached rock-bottom, then logic dictates that it can only go up from here. While it’s still difficult to tell if the company’s share price has indeed stabilized, the PIF must feel like it’s worth taking the calculated risk.

Boeing 737 MAX
The Boeing 737 MAX remains grounded but there is a high degree of anticipation that re-certification will happen soon. Photo: Boeing

Will this change commercial aviation in Saudi Arabia?

This move has interesting implications for one particular airline in Saudi Arabia.

The country’s flag carrier, Saudia (formerly Saudi Arabian Airlines) is wholly owned by the Kingdom of Saudi Arabia. Therefore, it would seem to be in the best interest of the country for its airline to order Boeing jets.

The airline’s fleet currently sits at 65% Airbus aircraft (a mix of A330, A321, and A320 jets), with the remainder Boeing (777 and 787). Its newest jet is the Boeing 787-10, having taken delivery of its first of the type in October 2019.

Saudia has 16 Boeing 787s in its fleet. They are a mix of the -9 and -10 variants. Photo: Chris Loh/Simple Flying

Perhaps because of this new investment in Boeing, we’ll see new orders come more from Boeing than Airbus in the years to come. Of course, for the foreseeable future, it’s hard to imagine that any airlines will be placing new aircraft orders.

How do you see this deal affecting Saudi commercial aviation? Let us know your thoughts in the comments.

Source : Simple Flying More   

This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.