China to Allow Airlines Back After Retaliatory U.S. Ban

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(Bloomberg) — China will ease a ban on flights to the country by foreign airlines on June 8, the aviation regulator said, a day after the U.S. issued an order to stop Chinese airlines from flying passengers to America.
Foreign airlines excluded from an earlier plan for inbound flights can operate one international commercial passenger flight to China every week starting Monday, the Civil Aviation Administration of China said Thursday. The announcement didn’t name any countries.
China already allowed some flights from foreign airlines under a “Five-One” policy introduced in March that limited international carriers to one flight a week. Airlines weren’t allowed to operate more flights than they had scheduled on March 12, which meant U.S. carriers missed out as they’d already suspended passenger services to and from China because of the coronavirus.
The U.S. Transportation Department said last month that China violated a bilateral agreement because it didn’t respond to requests by Delta Air Lines Inc. and United Airlines Holdings Inc. to resume flights.
Delta originally sought to restart China services on June 1, but couldn’t because Chinese authorities haven’t approved the application. Four Chinese carriers have maintained flights to and from U.S. airports.
“The Chinese government’s failure to approve their requests is a violation of our Air Transport Agreement,” the U.S. Department of Transportation said in a statement. It also accused China of being “unable to communicate definitively” about when it will allow U.S. carriers to resume flights.
The U.S. order on Wednesday would stop passenger services by Chinese airlines from June 16, though President Donald Trump could impose the ban sooner if he chooses.
Tensions have escalated between the U.S. and China, which are locked in a tussle that began over trade and spread to include Beijing’s handling of the virus, which first emerged in the city of Wuhan, and its treatment of Hong Kong. A phase one trade deal between the nations is in jeopardy, and along with it billions of dollars in Boeing Co. aircraft sales.
CAAC said flight quotas could be increased at a moderate pace if the risk is manageable, but any route would be suspended for a week if five passengers on the same flight were found to be positive for coronavirus in nucleic acid tests.
If 10 test positive, the route will be halted for four weeks, it said.
Air China Ltd.’s Hong Kong-listed shares declined by 1% Thursday morning, while China Eastern Airlines Corp. and China Southern Airlines Co. were little changed.
A U.S. ban on flights wouldn’t hurt Air China too badly given its limited exposure to the market, Bloomberg Intelligence analyst James Teo said, noting that only 6.5% of the carrier’s 2019 revenue came from North American routes.
China Eastern and China Southern also get the bulk of their revenue from the domestic market, and even more so now that international routes have been restricted by the virus.
In early January, there were about 325 scheduled flights a week between China and the U.S., but that slid to only 20 a week by four Chinese carriers by mid-February, according to the DOT.
Delta is seeking to restart flights to Shanghai on June 11 from Detroit and Seattle, while United also plans to resume three routes this month, pending approval. American Airlines Inc. currently plans to resume flights to China only in October.
(Updates throughout with comments and share-price moves.)
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