2007 US-China Combination Service Proceeding

Order 2007-1-4
OST-2006-25275

Issued and Served January 9, 2007

Order Addressing Motions of American and Northwest and to Show Cause on Allocation of US-China Combination Frequencies - Bookmarked

We tentatively decide to allocate United seven weekly combination frequencies for its proposed Washington (Dulles)-Beijing services in the U.S.-China market because it will offer the greatest overall public benefits. The rights would become available to United on March 25, 2007.

The record in this proceeding highlights the growing inadequacy of U.S.-China air services, with demand far exceeding supply under the current restrictive bilateral environment. Though China is the second largest trading partner of the United States, a combined total, on average, of only eleven daily nonstop flights are offered between the two countries. This shortfall of available nonstop service options emphasizes the importance of injecting as much nonstop capacity into the U.S.-China market as possible when awarding these frequencies.

The market between the Washington, D.C. metro area and China represents the largest overall O&D market without nonstop service. Currently, Washington, D.C.-China services operated by U.S. airlines involve only one-stop on-line connections via a U.S. hub or two-stop on-line connections via Tokyo. In the 12 months ended March 2006, approximately 92,000 passengers traveled between the Washington, D.C. metro area and China. Furthermore, the O&D traffic to China from the Washington, D.C. metro area is growing at a rapid pace. Only San Francisco, Chicago, and New York/Newark have more China O&D traffic than the Washington, D.C. metro area, and each of those gateways already has more than one nonstop service option to China.

United's B-747 service would provide 253,310 seats between the U.S. and China on an annual basis, 22% more capacity than Continental. Although Northwest will offer capacity almost equal to that of United, the record shows that there is much greater need for this capacity to China from the Washington, D.C. metro area than from Detroit, since, as we have emphasized already, the Washington, D.C. metro area is the largest O&D market without nonstop service to China.

By: Andrew Steinberg