The Japan-US mini-deal may have skirted one impasse, but it is the first of several Asian bilaterals where US negotiators face renewed battles over capacity and fifth freedoms.
Two rounds of China-US talks this year have made no progress on the question of allowing US carriers to fly seven additional frequencies that appear authorised under the present bilateral. FedEx has now secured US approval to buy Evergreen International's China route but is, together with Northwest, stymied by Beijing's resistance to more US frequencies.
The Japanese mini-deal could stiffen Beijing's resolve. Despite US declarations that it would not negotiate with Japan over existing rights, Washington finally conceded a new cargo route in exchange for Tokyo's approval of Subic Bay beyond rights. With this in mind Beijing could demand more reciprocal rights, specifically a new Los Angeles route for China Southern, before Northwest and FedEx can boost frequencies.
Since FedEx proposes to route its US-China flights via Japan, US negotiators must also revisit the thorny Japan-US fifth freedom issue. Initial talks were slated for September. With former trade minister Ryutaro Hashimoto, known for his toughness in US trade disputes, now leading the largest party in Japan's ruling coalition, there is no reason to suspect things will be easier the second time around.
Talks with Hong Kong look equally difficult. FedEx may need fewer fifth freedoms through the UK dependency following the Japan mini-deal, but other US carriers are still pressing Washington to secure further beyond rights. So long as the US persists in that quest, no deal seems likely. Hong Kong's negotiators are willing to play a waiting game, reasoning that Washington knows it will be harder to negotiate with Beijing than Hong Kong, so that the closer 1997 looms, the more Washington will need to cut a deal.
Vietnam is positioning itself for US talks following President Bill Clinton's announcement that Washington will resume diplomatic relations. Pham Vu Hien, Vietnam's director of transport, is already warning that his country will exchange fifth freedoms only in exceptional cases. Another Hanoi official predicts Vietnam will grant beyonds to only one US airline with capacity limits.
While US carriers scramble for designation, American Airlines is taking a different tack. Knowing that Vietnam Airlines prefers to codeshare new routes, it has elected not to apply for Vietnam authority but to focus instead on a possible partnership with the flag carrier. American believes the Vietnamese are favorably inclined because 'we pose less of a threat.' But Vietnam Airlines had agreed to explore a marketing pact with Delta.
Designation and capacity will also be key issues in upcoming India-US talks, where both sides are pulling in opposite directions. New Delhi wants to limit the unrestricted capacity and designations allowed under the present bilateral, while Washington wants more liberalisation. In August, India reluctantly approved United Airlines as a third US carrier, offering round the world flights starting mid-December. That will boost flights by US carriers to 25 weekly, compared with Air India's seven.
Air India wanted Chicago access in exchange for Indian approval of United's flights, but the Delhi relented under Washington's pressure, warning instead that it would seek revision of the bilateral.
Source: Airline Business
