The pipeline to China
Journey to the other side: Blake Snyder of Marietta, Ga., on United Flight 851 from Chicago to Beijing. He's hoping to sell golf carts to the Chinese.
Chicago to Beijing.
Beaming down from departure monitors at O'Hare International Airport, it seems generic, like any ordinary flight on an international carrier.
But for Elk Grove Township-based United Airlines, and the tens of thousands of business people who fly it, the 14-hour journey to the other side of the world has become a link between Midwestern manufacturers and the churning Far East factories they must tap to compete on the global stage.
It's an entrepreneurial express: aisles of MBAs and modern-day gold-miners hoping to cash in on the world's hottest economy.
This Chicago-to-Beijing route is also a bright spot for financially troubled United. The route helped spring the carrier out of bankruptcy protection, thanks to its popularity and the prices it can command: Round-trip fares range from $1,300 to $2,300. And for the last two years the flights have been packed, crew members say.
To compete with Singapore Airlines and other high-service Asian carriers, United can leave no stone unturned or seat unfilled.
"The Asian routes are a high-priority, high-revenue market and really help the company's bottom line, especially when it comes to the passengers in business and first class. That's where the market is," says John Schrauf, a captain who flies the Chicago-Beijing route and a 27-year United veteran.
On an April flight from Chicago to Beijing, the 747 is brimming with business passengers, elderly tourists and unlikely tour groups, such as a rowdy Christian choir heading to China for a performance.
Reg Harman, a sales operations director for Unisys Corp. in Pennsylvania, has been flying United into Asia for eight years. The flight is short if you're in business class, he says, but long in coach. That creates fierce competition among passengers maneuvering for a cushier ride.
"I have 100,000 frequent-flier miles, so that moves me to the top of the upgrade list," Mr. Harman says. "But there are so many 100Ks flying to China, I'm at the bottom today."
To endure the flight, passengers these days opt for peace and quiet over booze, crew members say. "They do a little work, eat their meal, have their wine, maybe watch a movie and then go to sleep for hours," head flight attendant Suzanne Wieland says. "They've developed their own routine because some of them do this trip multiple times a month."
She can identify the passengers who have stars in their eyes, if not money in their pockets: the aspiring entrepreneurs. "They're usually flying economy," she says, laughing.
During the descent, the capital city comes into view. The Great Wall winds its way through brown, sun-scarred hills. "Welcome to China," the flight attendants say, in Mandarin and English.
The growing travel to Beijing is the result of geography and shifts in the global economy. As a gathering point for air traffic across the U.S., Chicago is an obvious gateway. The Midwest, of course, is also home to manufacturing. And as more companies move production to China and Illinois companies including Motorola Inc., Caterpillar Inc. and Leo Burnett establish offices in its capital, the route is becoming much busier.
"Beijing is clearly the best hub in China," says Graham Atkinson, United's senior vice-president of worldwide sales and alliances. "It's a tremendous platform."
The carrier doesn't track flights by country, but the regional statistics are telling: On flights between the U.S. and the Asia-Pacific region, the April load factor, or percentage of paying passengers on board, was 79%, compared to 77% the year before. Over the last year United also increased capacity to Asia by 6% and saw an 11% jump in the lucrative business of flying cargo across the Pacific. "We don't want to leave any cargo behind because it pays so well," Mr. Schrauf says. "If you take off with less than maximum weight, you're leaving money behind." Sometimes that means standby passengers are left behind instead.
United is trying to get more bodies aboard, too. To keep up with demand, the airline is flying more 747s to Beijing this year. The plane, United's largest, carries 347 passengers, or 89 more than the 777, which also flies the route.
The demand for more seats is, of course, a good thing for United as it struggles with rising fuel costs. A flight between Chicago and Beijing burns about 52,000 gallons of jet fuel. At an average price of $2 a gallon, that's more than $104,000 just to fill up.
The Asia-Pacific region now accounts for 25% of United's capacity and 18% of operating revenue. By contrast, the North American market made up 62% of operating revenue last year. But long-term, the China routes are critical, analysts say.
United is "in the catbird's seat," says Michael Boyd, president of the Boyd Group, a Colorado-based aviation consultant. It has been flying non-stop from Chicago to Beijing since 2001 and to Shanghai since 2004. United, in fact, offers 28 non-stop flights from the U.S. to mainland China each week, more than any other U.S. carrier.
United owes its early lock on China to a fortuitous purchase 20 years ago. A 1952 treaty between the administrations of Chairman Mao and President Harry Truman made Pan American World Airways and Northwest Airlines the only U.S. carriers allowed to fly into China. When United bought bankrupt Pan Am's Pacific division for $715 million in 1986, the China routes came with it.
United and Northwest are also the only U.S. carriers with rights to take passengers in Japan to other points in Asia, giving them more flexibility to offer backdoor routes from the U.S. into China.
But United's lead is no sure thing. Restrictions limiting the number of carriers that can fly into the country have been loosening. After 14 years of lobbying, American Airlines got a green light from the Chinese government last year. Since April it has offered non-stop flights to Shanghai out of United's backyard: O'Hare. Last year, Continental Airlines also got permission to fly nonstop to Beijing from Newark, N.J.
To bolster its Sino service, United has entered code-sharing agreements with Shanghai Airlines, and has brought Air China into its global Star Alliance.
United's Mr. Atkinson says the airline has also been working diplomatic channels to expand for the long run and hopes to see more routes open up next year.
United is looking to cultivate flights to southern China hotbed cities like Guangzhou, the booming capital of Guangdong Province and home to 11 million people. "We will be making an aggressive attempt to win those, but there are still some airlines that don't have any service to China. It will be a well-fought battle," Mr. Atkinson says.
It's also a tough sell in Beijing, where government officials are wary of foreign competition. "The Chinese government is nervous about open skies," Mr. Atkinson says. "As their industry becomes more sophisticated they have some angst that U.S. carriers will obtain a head start in the market."
Analysts cite other sticking points, too. A key, says Aaron Gellman, a professor at Northwestern University's Transportation Center, is United's ability to acquire enough planes for a rapidly growing Asian market.
"They're paying plenty of attention to opportunities in Asia," says Mr. Gellman. But if United can't fully cash in on China, he says, it will be due to a lack of financial resources, "not a lack of will."
Until then, United is focusing on the planes it already has flying to China. It's spending $165 million this year to upgrade first- and business-class areas on these and other international flights.
Then there's the potentially lucrative flip side of the China boom: Chinese business people traveling to the Midwest to do deals or cultivate manufacturing ties. And while China still has restrictions on traveling abroad, outbound tourist travel is picking up, observers say, and stands to only climb higher.
To attract these passengers, United is touting its recent 20th anniversary of flying to China in various ads. "That's important in an Asian culture where relationships and longevity count," says Mark Russell, United's managing director of the Pacific South.
United is also hyping its vast U.S.-China network. "When we look at our Chinese customers' travel profile, we see they're going from Asia into the U.S. and then connecting to a number of different points," Mr. Russell says. "Then they return to the point they entered and head back to yet another point over in China."
This outbound Chinese market is where United might face some of its biggest rivalries, though not from American, Northwest or other domestic brethren. Stiff competition is expected from China's homegrown airlines, which, despite limited infrastructure and logistical capabilities, are starting to show signs of life, particularly Air China and China Southern. China Southern already has well-booked routes from Los Angeles to Guangzhou, among others.
"They're in the Bronze Age," says Richard Aboulafia, vice-president at Teal Group, an aviation analysis firm in Virginia. "But give these Chinese carriers 10 years. They may wear Mao jackets from time to time, but these are capitalists. They can't help themselves."
Neither, it seems, can Chicago's own capitalists, packing United's planes with an odd mix of trepidation and big dreams.
On a recent flight, Mark Rotblatt, president of Vanguard Chemical Corp., sits in business class. It's his first trip to the Chinese mainland, where he hopes to do some prospecting for his family-owned company in Crestwood, which makes industrial solvents and degreasers for the printing industry.
"As a manufacturer, I'm seeing more and more of the work that was done in Chicago being done there," he says. "You can't ignore the future, and the future is China."
