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China Eastern Airlines Corporation Limited

Hereby applies for an exemption and a statement of authorization to enable China Eastern to offer codeshare services with American Airlines, Inc. beyond Beijing and Shanghai, People's Republic of China, to interior points in China on certain China Easterri-operated flights. Specifically, China Eastern requests the issuance of an exemption to pennit it to engage in foreign scheduled air transportation of persons, property and mail between the United States and Shanghai/ Beijing and beyond to Changsha, Dalian, Fuzhou. Guilin, Kunming, Nanchang, Ningbo, Shenzhen and Wuhan as well as a statement of authorization under 14 C.F.R. Part 212 to place the designator code of American on such flights.

Applications have been submitted by Northwest and Air China (OST-01-9183, March 15, 2001) and by Delta Air Lines, Inc. and China Southern Airlines Company Limited (OST-01-9314, March 30, 2001) for the nine new points. Northwest/Air China are seeking Changchun, Chongqing, Dalian, Fuzhou, Guilin, Harbin, Shenzen, Wuhan, and Zengzhou. Delta/China Southern are seeking Changsha, Chongqing, Fuzhou, Guilin, Haikou, Kunming, Nanning, Shantou, and Wuhan.

Since three points are common to all three applications (Fuzhou, Guilin, and Wuhan), the Department will need to choose the remaining six points. In such a proceeding, the applications of American/China Eastern and Delta/China Southern should receive priority consideration, since Northwest received all six codeshare points it named last year and Northwest is a dominant incumbent carrier in the U.S.-China market.

Counsel:  Condon Forsyth, Evelyn Sahr, 202.289.0500

Delta Air Lines, Inc. and China Southern Airlines Company Limited, and American Airlines, Inc., and China Eastern Airlines Corp, Ltd.

Of the points involved, Northwest/Air China, Delta/China Southern and American/China Eastern propose to serve three common points: Fuzhou, Guilin and Wuhan. These three points, therefore, are not in dispute, and the Department should select these three points under the Protocol. Thus, this answer addresses only the "disputed" points.

Of the "disputed" points, Northwest and Delta propose to serve one common point (Chongqing), Northwest and American propose to serve two common points (Dalian and Shenzhen), and Delta and American propose to serve two common points (Changsha and Kunming). Only Northwest proposes to serve three points (Changchun, Harbin and Zengzhou), only Delta proposes to serve three other points (Nanning, Haikou and Shantou), and only American proposes to serve two other points (Nanchang and Ningbo). For ease of reference, these points are summarized in the attached Exhibit A.

For multiple reasons, the public interest will be best served if the Department selects the points that Northwest proposes to serve. First, Northwest can provide the most service to the interior China points. Northwest is able to serve the interior China points from more U.S. gateways and is able to offer more weekly frequencies to China than either Delta or American. Northwest operates four roundtrip Detroit-Beijing flights per week. Northwest also offers code-share service on Air China flights between Los Angeles and Beijing at a level of five roundtrip flights per week and on Air China flights between San Francisco and Beijing at a level of three roundtrip flights per week, plus two additional weekly eastbound flights. Thus, Northwest can offer code-share service to interior China points connecting with up to 14 weekly eastbound and 12 weekly westbound U.S.-China flights operating between Beijing and three U.S. gateways: Detroit, Los Angeles and San Francisco. In contrast, Delta could offer codeshare service to interior China points from only one U.S. gateway (Los Angeles) at a level of up to four roundtrip frequencies per week on China Southern's Los Angeles-Guangzhou service. Likewise, American also could offer code-share service to interior China points from only one U.S. gateway (also Los Angeles) at a level of up to seven frequencies per week on China Eastern's Los Angeles-Shanghai (PVG)-Beijing service.

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193

Delta Air Lines, Inc. and China Southern Airlines Company Limited, and American Airlines, Inc., and China Eastern Airlines Corp, Ltd.

Delta has proposed an arrangement under which the Department would select the three points in China that are common to all of the applications and select six more points on the basis of "actual" U.S. traffic levels. Delta has identified the six points that it believes have the greatest U.S. traffic levels, based on CRS-generated MIDT data, and suggests that the Department select these six points for code-share service by U.S. carriers.

Northwest appreciates Delta's attempt to develop a compromise arrangement and agrees that the three uncontested points should be selected. Unfortunately, the MIDT data upon which Delta relies do not provide a fair or meaningful basis for selecting the six "disputed" points.

Contrary to Delta's suggestion, MIDT data are very poor indicators of the amounts of traffic moving between the United States and points in China, particularly non-gateway points such as those at issue here. The MIDT data have three fundamental shortcomings. First, over 90 percent of the bookings made in China are made in the Air China CAAC MIS system; these bookings are not included in MIDT data. Thus, over 90 percent of the China point-of-sale bookings are not reflected in the traffic figures used by Delta.

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193, megan.rosia@nwa.com 

2001 China Code-Share Points Case (American Airlines, Inc.; Northwest Airlines, Inc. and Air China International Corp.; Delta Air Lines, Inc. and China Southern Airlines Company Limited; and China Eastern Airlines Corp, Ltd.)

Order 2001-7-10 selects the Chinese cities Wuhan, Fuzhou, and Guilin as three of the nine available Chinese points for use by U.S. carriers for code-share operations with their Chinese code-share partners; (b) grants the regulatory authorities necessary for the captioned U.S. and Chinese airlines to serve these points; (c) tentatively selects the following four Chinese points as additional code-share points: Kunming, Changsha, Dalian, and Chongqing; and (d) tentatively decided that the remaining two points be selected by permitting American Airlines and Delta Air Lines to choose one additional code-share point each from those requested in their respective applications.

By:  Susan McDermott

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