U.S. airlines vie for new nonstop LAX-China routes

Chinese airlines offer three nonstop flights to China from Los Angeles, but James Rice always hops on a U.S. carrier even though it means stopping over in another city, adding several hours to his trip.

"Seats are small, food is bad and service is a little grouchy," Rice said of the Chinese airline that has a nonstop flight from Los Angeles International Airport to Shanghai, where he runs Tyson Foods Inc.'s China operations. On one flight, the carrier, China Eastern Airlines, forgot to load food for its journey to Los Angeles, he said.

But with burgeoning demand for travel to China, even carriers with connecting flights are often crowded these days, Rice said. Return trips are even worse, which led Rice to once consider flying back to the U.S. by way of Europe.

That's why Rice and other U.S. business travelers are rooting for United Airlines, the largest carrier at LAX, in its bid to start nonstop service to Shanghai in 2009.

The UAL Corp. subsidiary would be the first U.S. carrier to offer a direct flight to any city in China from LAX.

"I'd be absolutely thrilled," Rice said. "It'd be very convenient for me."

But Chicago-based United faces stiff competition from other major domestic carriers who have proposed different city routes as they battle for a limited number of rights to fly from the U.S. to China.

Los Angeles is being pitted against cities such as Philadelphia, Chicago and Atlanta in what has become one of the more heated lobbying efforts in Washington.

At stake is an estimated $200 million in annual revenue that a U.S.-China route can bring to an American carrier. Also, the number of U.S. passengers flying to China has been growing 10% annually for the last several years, twice the growth rate of any other transpacific traffic, according to the International Air Transport Assn.

"China is considered the next big thing," said George Hamlin, managing director of aviation consulting firm Airline Capital Associates Inc. "Nobody wants to be left behind."

Although demand is outstripping available seats, China has been protective of its domestic airlines and has limited foreign carriers from offering direct flights to the country. It remains one of the few countries with such restrictions.

U.S. airlines currently operate only seven nonstop flights to China, the world's most-populous country. In addition, Northwest Airlines Corp. has three connecting flights via Tokyo, and dozens of other connecting flights to China are offered by Asian carriers such as Korean Air or Asiana Airlines.

Under a U.S.-China pact reached in May, U.S. carriers will be allowed to operate six new nonstop flights to China over the next three years: one this year, another next year and four more in 2009.

But it will be up to the U.S. Department of Transportation to select which routes to dole out. Seven airlines have proposed 11 routes. A decision is expected this fall.

Analysts say United faces an uphill battle.

The last U.S. carrier to win a route to China was United when it began daily nonstop service in March between Beijing and Washington. And United already operates a direct California-to-China route, from San Francisco to Shanghai.

Delta Air Lines Inc., which wants to offer a direct flight from Atlanta to Beijing, has argued to federal officials that giving United another nonstop flight to China would weaken competition.

"If entrenched carriers United and Northwest are awarded additional service to China in 2009, 75% of service between the U.S. and China will be operated by these two airlines," Delta said in its bid proposal, noting that it was one of only two domestic airlines that didn't have any rights to fly to China.

Delta has lined up significant support. Ten congressional representatives, two U.S. senators and governors from 10 Southeastern states have been lobbying U.S. transportation officials.

United said it had the backing of the California congressional delegation and Gov. Arnold Schwarzenegger, who wrote a letter to Transportation Secretary Mary E. Peters that said United's nonstop service would boost tourism and "pump up our state's economy."

United and Los Angeles-based business travelers argue that transportation officials should favor the L.A.-Shanghai route because of the huge trade that flows between Southern California and China.

The region has more China-bound passengers than any other U.S. metropolitan area, United said. In 2006, nearly 282,000 people, or 20% of total U.S. travelers to China, were from Southern California. Second-largest was New York, with about 15% of the total.

United also noted that the region has more Shanghai-bound passengers than any other area.

Los Angeles "has the greatest need and we think by a pretty overwhelming margin," said Mike Whittaker, United's senior vice president for international and regulatory affairs. "We have the most compelling case."

Whittaker said United's China flights were some of the more profitable ones because they were generally full, including the lucrative business and first-class sections.

In contrast, Chinese carriers offering international service cater predominantly to Chinese passengers. Those airlines often have plenty of vacancies in business and first class, making some of those routes unprofitable.

China's three largest state-owned carriers -- China Eastern, Air China and China Southern Airlines -- currently operate nonstop service between the two countries, but none of those flights is profitable, according to a report by ChinaVest Ltd., a Shanghai merchant banking advisory firm.

For China Eastern, the Los Angeles-Shanghai route isn't much of a moneymaker, said Luo Zhuping, an executive director of the company. But he doesn't blame service complaints such as those from Rice of Tyson Foods.

"The main reason is that we don't have many business guests," he said. "Most of our guests are Chinese people and our ticket prices couldn't go up."

Alex Xu, a Los Angeles businessman who is building a chain of Greentree Inn hotels in China, travels to Shanghai 10 times a year. He flies first class on China Eastern.

Service generally has been good but the airline has trouble arriving on time, Xu said.

"I would definitely consider switching to United," he said, "if there was no major delay problem."
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