China to allow foreign airlines back after US retaliates

China will ease a ban on flights to the country by foreign airlines on June 8, changing course a day after the Trump administration demanded the nation be reopened to U.S. carriers or face curbs on its own companies flying passengers to America.

Foreign airlines excluded from an earlier agreement for inbound trips can operate one international commercial passenger flight to China every week starting Monday, the Civil Aviation Administration of China said Thursday. It didn’t name any countries or carriers.

While the timing may have been coincidental, it appeared as a concession from China just as tensions between the superpowers intensify. The nations are locked in a tussle that began over trade but escalated to include Beijing’s handling of the coronavirus and its treatment of Hong Kong. The tensions put the phase one trade deal signed Jan. 15 in jeopardy, along with billions of dollars in Boeing Co. aircraft sales.

“China and the U.S. should use this opportunity to restore high-level and diplomatic communications as soon as possible,” said Zhu Feng, director of the Institute of International Studies at Nanjing University. “Both sides should cut short the hawkish and emotional rhetoric, as they’re against business interests of both.”

Thirty-seven Chinese cities can accept flights, including Beijing, Shanghai and Wuhan, where Covid-19 first emerged. That list could change in the future, CAAC said.

If no passengers on a particular route test positive for coronavirus for three consecutive weeks, the operating airline can increase services to twice a week, CAAC said. However, any route would be suspended for a week if five passengers on the same flight tested positive. If 10 test positive, the route will be halted for four weeks.

China already allowed flights from some foreign airlines under a policy introduced in March that limited them to one flight a week and didn’t allow them to operate more services than they had scheduled on March 12.

U.S. carriers missed out because they already had suspended passenger services to and from China because of the coronavirus pandemic, which devastated the global aviation industry as countries imposed travel restrictions and demand disappeared.

Washington’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. The order stops short of an outright ban, allowing Chinese carriers to operate one flight to the U.S. for each flight that China grants to American carriers.

The U.S. Department of Transportation 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. 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 DOT said Wednesday. It also accused China of being “unable to communicate definitively” about when it will allow U.S. carriers to resume flights.

A U.S. ban on flights wouldn’t hurt Air China Ltd. 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 Airlines Corp. and China Southern Airlines Co. also get the bulk of their revenue from the domestic market, and even more so now that international routes are restricted.

Air China’s Hong Kong-listed shares were little changed Thursday, as were mainland-listed shares for China Eastern and China Southern.

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. plans to resume flights to China only in October.

U.S. airline shares rose Wednesday amid a broad market rally and signs that travel demand is starting to rebound. A Standard & Poor’s index of major carriers rose 7.6% to the highest since March 27, with United leading the gains as it jumped 13%.

Boeing also climbed 13% after the International Air Transport Association indicated a recovery was underway for global airlines. Still, the tension between the U.S. and China adds to the risk and uncertainty for Boeing’s 737 Max and 787 Dreamliner, two aircraft that are critical to its recovery from the worst downturn in aviation history.

While China was the largest customer of the 737 jetliner before Trump was elected, its airlines last ordered the Max in September 2016, according to Boeing’s website. The country hasn’t bought any planes from the U.S. manufacturer in two-and-a-half years.

Airlines for America, a trade group that represents large U.S. carriers, applauded Wednesday’s announcement on the restrictions for Chinese carriers.

“We believe DOT’s order will ensure fair and equal opportunity for passenger airlines with respect to service to and from China,” it said in a statement.