US-China open skies: a window in 2019 – alignment of airline partnerships & airport infrastructure

The year 2019 presents a possible opening for China and the United States to sign an open skies agreement. This would principally lift restrictions on flights between the countries - important, since both nations have saturated primary traffic rights and there have been unsuccessful negotiations to expand the allotment.

Most importantly, open skies is a prerequisite for US approval of US-China airlines' joint ventures with antitrust immunity. These partnerships permit airlines to coordinate networks and pricing jointly - which, they say, increases consumer choice, but which other groups worry reduces competition, after experience in the trans-Atlantic market.

Perhaps paradoxically, the lure of a JV will mean that the airlines lobby their governments for open skies that might eventually reduce competition. US airlines will want greater slot availability at Shanghai and Beijing, which could occur in 2019.

Finally, airlines will need to have confidence in a shared future with their partner. China Eastern is close to Delta, while China Southern has a young partnership with American Airlines. Air China, however, does not feel close to United Airlines, which has the highest presence of its own metal in the market. Air China questions whether United actually wants open skies. There is unlikely to be any government deal without the support of Air China, the flag carrier, and a major airline that enjoys a close relationship with the regulator.