China, U.S. agree to boost cargo, passenger flights

By John Hughes and Rip Watson
Bloomberg News

The United States and China will increase the number of passenger and cargo flights between the countries to meet demand for trade that expanded 23 percent last year to $181 billion.

The accord will more than double the number of U.S. carriers that can serve China and increase flights fivefold between the countries in six years, the U.S. Department of Transportation said in a statement.

Current flight limits have made air-cargo rates from China to the U.S. the highest worldwide and almost double the global average, said Brian Clancy, principal at freight consulting firm MergeGlobal Inc. China's economy has grown 9 percent annually in the past decade, prompting FedEx to add service and American Airlines to consider starting it.

"This will make the mainland Chinese air-cargo market more competitive," Clancy said. "The long-term beneficiary will be consumers, who will be happy with lower prices."

Added competition will reduce shipping rates for retailers such as Wal-Mart Stores Inc. and Target Corp., whose imports from China include everything from clothes to DVD players.

China is the third-largest U.S. trade partner after Canada and Mexico, and China trade accounts for 8 percent of the U.S. total. China's $152 billion in exports to the U.S. last year dwarfed U.S. exports of $28 billion to China. Only Canada exports more to the U.S.

The added flights could shift some cargo to all air from a combination of air and sea transport, Clancy said.

The U.S.-China cargo market will expand 11 percent annually between now and 2022, said China Aviation Industry Corp., a state-owned planemaker, and James Oberstar, ranking Democrat on the House aviation subcommittee, said more than half of exports to China travel by air.

Airlines based in both countries will be able to serve any city in the other country. U.S. companies previously were limited to five cities and Chinese carriers to 12 U.S. destinations.