China Eastern Seeks Rights to Link Chengdu and Nanjing to Los Angeles

China Eastern Airlines is seeking rights to launch a new link between the Chinese cities of Chengdu and Nanjing and Los Angeles from the middle of this year. The carrier already serves Los Angeles from its main base in Shanghai, which it also links to Honolulu, New York and San Francisco.

In its application to US Department of Transportation for authority to conduct scheduled foreign air transportation to the US, China Eastern said it planned to introduce flights from Chengdu, via Nanjing to Los Angeles from June 30, 2015 using an Airbus A330-300.

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The airline said the grant of this authority will allow it to “provide valuable services that were not authorised in its original foreign air carrier permit but are in the public interest. The application is consistent with the US-China air services agreement from September 1980 that has since been amended in April 1999, June 2004 and July 2007.

Air travel between the United States and China is on the rise and this application is just one of a number of new routes set to be introduced between the two countries in 2015. With secondary cities such as Nanjing, Wuhan, Ningbo, Quindao, Chongqing all experiencing rapid expansion, they are beginning to justify their own direct connections to big foreign markets.

Last year, an estimated 2.2 million Chinese visited the United States, up 24 per cent from 2013 and an increase to the validity period of tourist and business visas from one year to ten years last November will only promote further visitor engagement. A study by the Global Business Travel Association shows Chinese business-travel spending jumped 15.9 per cent last year, more than twice the country's overall economic growth rate.

The association predicts spending on airlines, hotels and other business-travel necessities to grow by 18 per cent this year, pushing total Chinese business-travel spend far beyond the $262 billion registered in 2014, outpacing United States travel spending in the process.

Chengdu, host city of Routes Asia in April 2012 and for next year’s World Routes, is already linked directly to the United States through flights by United Airlines to San Francisco. The route, operated using a Boeing 787-8 Dreamliner, was launched in June 2014 and had handled an estimated 32,000 passengers up until the end of last year with estimated loads of around 85 per cent.

If authority is granted, this will be the first link from Nanjing to the United States. The city, the capital of Jiangsu province in Eastern China, has served as the nation’s capital for several periods of time and has long been one of China's most important cities.

Located in the lower Yangtze River drainage basin and Yangtze River Delta economic zone, it has a total population of over eight million people (an urban population of approaching seven million) and is the second-largest commercial centre in the East China region after Shanghai.

In the chart, below, we look more closely at estimated bi-directional O&D passenger flows between Nanjing and the United States. This is clearly an emerging market with demand rising 143.9 per cent between 2005 and 2010 to around 18,000 annual passengers, then by 56.9 per cent between 2010 and 2014 when numbers had grown to almost 30,000: demand grew an estimated 48.8 per cent in 2014 versus the previous year.

Our analysis of the data shows that Los Angeles (LAX) was the largest market in the United States for demand to and from Nanjing, with a 27.4 per cent share in 2014. New York (JFK) was second with a 20.0 per cent share and San Francisco third with a 15.0 per cent share.

China Eastern is already the third largest carrier between Nanjing and the United States with a 12.9 per cent share of the total bi-directional demand in 2014, thanks to its existing flights to the country from Shanghai. Air China is the dominant carrier in this particular market with a 34.4 per cent share, while Cathay Pacific Airways has a 12.9 per cent share. United Airlines is the largest North American carrier with a 10.7 per cent.