The launch of Northwest Airlines' non-stop Detroit-Beijing service in May is a competitive response to United Airlines' dominance in the US-China market that has been a long time in coming. The carrier says the new route gives it an edge in the eastern US, which generates two-thirds of China-bound traffic in a total market that is growing at 20 per cent annually.

The two chief causes of the delay boiled down to the fundamental questions of survival first for Northwest, and an aeropolitical impasse beyond the control of the Minneapolis-based carrier's management.

Back in the summer of 1993 incumbent passenger carriers Northwest and United operated two and four weekly services to China, respectively, while cargo operator Evergreen operated another two. 'We were not interested in expansion at the time because we were in trouble financially,' explains Loren Aandahl, Northwest's director of international planning. The bilateral with China provided for a total of 20 weekly frequencies and in February 1994 United 'scooped' its rival by taking 10 of the remaining 12 authorities, giving it daily flights to both Beijing and Shanghai over Tokyo/Narita. Northwest secured the remaining two frequencies in mid-1994 giving it three weekly Beijing services and just one weekly rotation to Shanghai, all routed from Los Angeles over its Narita mini-hub.

Northwest was obviously at a competitive disadvantage, but Aandahl focused on the provision in the bilateral that allowed US carriers to increase weekly frequencies from 20 to 27 per week from January 1995. 'We started analysing our options to ensure we were not outdone by United,' explains Aandahl. He first considered 'the low-risk strategy' of routing additional frequencies over Narita but concluded this was a 'zero-sum gain' as restrictions at Tokyo's international airport meant the carrier would have to sacrifice another Asian fifth freedom service to make room for the new one.

Instead, Aandahl concentrated on the feasibility of launching non-stop services to Beijing from the carrier's main hub at Detroit, recognising that United was limited in what it could do out of the eastern US because its main hub at Chicago is only an MoU route under the US-Japan bilateral. (Unrestricted access from a number of US points into Narita is the key to both US carriers' strong position in Asia.) In contrast Northwest has no capacity constraints into Narita out of Detroit. The carrier was already finding that its strategy of feeding traffic from secondary US markets east of the Mississippi through Detroit into Tokyo, Osaka and Seoul was giving it an 'extremely strong position' on Asia-Pacific routes from the eastern US.

The major hurdle still standing between Northwest and non-stop Detroit-Beijing services was China's refusal to clear the additional seven weekly frequencies. Beijing's main objection was that its own carriers were nowhere near operating the original 20 weekly frequencies. The dispute was not settled until December 1995, whereas Aandahl had planned to start the service in the second quarter of 1995.

The other main attraction in launching the non-stop Beijing service was that the extra B747-400 needed to operate the service boosted the utilisation of the aircraft of that type at Detroit to such an extent that it 'mitigated the risk on the route,' says Aandahl. The extra aircraft was the 10th B747-400 'shell' at Detroit and, on top of the three times weekly Beijing service, it also allowed the carrier to add a fourth weekly frequency to Seoul and a second daily service to Amsterdam.

China is Northwest's second most important market after Japan and the non-stop service from Detroit will have a 'halo-effect' on the hub's Asian credentials. The service itself is a 'business man's bonanza' in terms of the elapsed time it knocks off United's Beijing services from both primary and secondary eastern markets, says Aandahl. He estimates that a passenger from Raleigh-Durham would save seven hours flying with Northwest to Beijing over Detroit versus United's connections over Chicago and Tokyo.

Northwest received a further boost in its battle with United when it signed an MoU with Air China in May as a first step towards creating a strategic alliance. Aandahl says it is 'probable' that the alliance will stretch across all US-China routes and points to the significance of Detroit-Beijing, which would eventually become the service connecting the two partners' main hubs.

Ironically, while aeropolitical barriers prevented Northwest from starting the service sooner, the lifting of other political barriers made operating the route possible. New airways have allowed Northwest to route its Detroit-Beijing service over Alaska and down through eastern Siberia, crossing into China at Khabarovsk. 'We're pioneering again,' says Aandahl. 'This would have been aeropolitically unimaginable five years ago.'

Mark Odell

Source: Airline Business