Chinese skies to open wider to EU airlines By Wang Yu (China Business Weekly) Updated: 2004-09-23 10:22
China is opening its skies further to European airlines, following a similar
move which benefited US carriers.
The General Administration of Civil Aviation of China (CAAC), China's
national air authority, last week sent a delegation to negotiate with the German
air authority about a possible aviation market-liberalizing pact, similar to the
one China made with the United States in July.
"The spirit of market opening will be the same, no matter if the counterpart
is from the United States or European countries. Further opening of the market
will drive domestic carriers to fly faster and higher, and more importantly, the
increasingly open market environment will enhance the importance of Chinese
aviation industry in the global air transportation arena," Liu Weimin, director
of Aviation Laws Research Centre with the Civil Aviation Management Institution
of China, said last week.
"Of course, since every market is different from each other in a number of
ways, the negotiation will have a different focus this time and it is a little
too early to forecast the final outcome," Liu commented.
Echoing Liu, Song Qinghua, deputy director of the CAAC's Department of
International Affairs and Co-operation, said recently that many differences
would exist between the envisaged pact with European countries and the one
already agreed with the United States.
"The Sino-German aviation talks differ from the negotiations between China
and the United States.
"First of all, although we, to some extent, are connected with the European
Union, we will mainly talk with individual European countries," Song said.
Since European countries differ greatly in terms of their aviation
transportation capacity, market size and economic ties with China, it is
impossible for China to grant them uniform market access, according to industry
insiders.
China started talks with various European countries as early as 2002 on
further aviation market liberalization, and has already discussed the issue with
a number of countries, including Germany, Austria, Britain, Italy and France.
Germany was the first European country to discuss a market opening deal with
the CAAC.
Sources close to the negotiations said the delegation's visit to Germany may
produce a draft agreement. It is actually the second round of a bilateral
aviation talks between the two sides since September 2002.
Germany-based global aviation giant Deutsche Lufthansa AG, expressed optimism
last week over the prospects of the Sino-German negotiations, saying that the
anticipated deal will surely boost the aviation industry of the two countries,
especially as more Chinese now have the chance to tour Europe.
But since the talks are far from finished, Lufthansa did not disclose any
details.
"Although details of the pact are currently unavailable, one thing is
certain, the market will be opened gradually, and there will be ample time for
domestic carriers to prepare for co-operation and competition," Liu remarked.
Chinese carriers are now busily preparing for the increased competition which
will result from the deal.
Air China, the national flag carrier, aims to begin marketing an initial
public offering worth about US$500 million towards the end of the year, banking
sources said recently.
Recent reports have indicated that Air China will sell a 10 per cent stake to
Lufthansa.
The European air giant neither confirmed nor denied these "latest
developments".
"We would not comment on this speculation now," Lufthansa said last week.
But the German airline did lay emphasis on its close partnership with Air
China, involving a wide range of operations, including the passenger airline
business, logistics, catering and aircraft maintenance.
Under a series of accords signed with the European Union, organized groups of
Chinese tourists can now travel throughout the 25-member European Union --
except for Britain, Denmark and Ireland.
Although Britain was not on the "authorized destination status" list of China
for the time being, the country reached a new bilateral air market opening
memorandum with China in February this year.
The deal allows for gradual market opening privilege to airlines from both
sides on a year-on-year basis.
Many analysts believe that the agreement with Britain will serve as a model
for the new pact between China and other European countries.
"The new air agreement will also provide gradual market freedom, just like
the one between China and Britain," Liu predicted.
According to the Sino-UK memorandum, British airlines can operate 15 flights
to China this year, and the figure will rise to 25 next year and 31 in 2006.
"This kind of gradual market-opening agreement is more favourable for Chinese
carriers, since it offers us more time and space to compete with foreign
counterparts when we are short of the capacity to open more flights," a China
Eastern Airlines official commented.
China and the US sealed a new aviation liberalization agreement in July in
Washington after four rounds of talks starting last February.
The new agreement will allow five additional airlines from each country to
serve the US-China market.
The United States may name one additional all-cargo airline, while China may
name either a passenger or cargo airline, to start services later this year.
The other four new-entrant airlines may be either passenger or cargo
carriers, with one new carrier entering the market in 2005, 2006, 2008 and 2010.
The agreement also will allow for an additional 195 weekly flights for each
side -- 111 by all-cargo carriers and 84 by passenger airlines -- resulting in a
total of 249 weekly flights at the end of a six-year phase-in period.
