U.S. airlines could lose fares on Taiwan issue
Delta, American still refer to island as a region or country.
With a month to go before the world’s major airlines must comply with Beijing’s order to recognize Taiwan as part of China, U.S. carriers risk flying fewer mainland passengers by staying defiant.
While Japan Airlines, ANA Holdings and Australia’s Qantas Airways have changed how they described Taiwan on their websites, Delta Air Lines and American Airlines are among the last few standing, calling the island a region or country.
They could face measures such as air-traffic control delays, ramp inspections, hold-ups at immigration and security checks, according to Robert Mann, the New Yorkbased head of aviation consultancy R.W. Mann & Co.
“The present trade regime and rhetoric is getting ugly, and it may get far uglier,” Mann said. “Short of an outright ban, the Chinese could make it commercially, operationally difficult for U.S. carriers arriving and departing Chinese airports.”
Delta and American Airlines, which have until July 25 to fall in line on the Taiwan issue, say they are consulting with the U.S. government even as the White House dismissed the order as “Orwellian nonsense.”
A representative for United Continental Holdings, the U.S. carrier with the most services to mainland China, declined to comment.
The diplomatic spat comes amid a worsening tit-for-tat trade war between Donald Trump and Xi Jinping.
The major long-term threat is to the establishment of a China-U.S. “open skies” aviation treaty, a precondition for code-share alliances that can pass muster with antitrust agencies, Mann said.
Aerospace giant Boeing has agreed to sell 20 Dreamliner commercial jets to Vietnamese start-up airline Bamboo Airlines in a deal worth up to $5.6 billion, the companies announced Monday, just weeks after the airline struck a similar $3 billion deal with French competitor Airbus.
The new airline is a project of FLC Group, a publicly traded resort developer in Vietnam. FLC executives said they initially want to ferry tourists to their resorts in disparate parts of the country.
But the choice to buy 787 Dreamliners — a wide-body airplane built for long-haul flights — hints at broader ambitions.
FLC chairman Trinh Van Quyet said he wants to expand to 16 domestic routes and 10 international routes, starting with regional flights next year.
“The deal with Boeing today is only the first step for us. We want to have more than 100 planes in the future,” Quyet said.
The deal was celebrated in a signing ceremony at the U.S. Chamber of Commerce attended by Voung Dinh Hue, Vietnam’s deputy prime minister.
After the ceremony the group held an investor conference at Trump International Hotel, where a stream of prepared videos praised FLC’s tourist resorts.
Vietnam is still an officially socialist country with a largely state-controlled economy, but the government has undertaken reforms in recent years to attract foreign investment and tourism.
FLC Group is undertaking substantial risk by wading into the airline business in such spectacular fashion. While start-up airlines are not unheard of, placing such a large order without testing the market first is seen as highly unusual.
“To purchase 20 787s indicates a degree of confidence — some would say arrogance — and very deep financial pockets,” said Henry Harteveldt, an analyst with Atmosphere Research. “It indicates a willingness to ignore basic financial planning for an airline, where you usually buy a few and wait for the market to materialize. It’s a very bold, very risky move.”
Richard Aboulafia, an aerospace analyst with Teal Group, said he is skeptical that Vietnam’s aviation market can sustain another airline, since it has three airlines regularly serving various parts of the country.