CONTINENTAL MAY SEEK SHANGHAI-GUAM ROUTE

UNCLAS SECTION 01 OF 02 SHANGHAI 000253 SIPDIS SENSITIVE SIPDIS STATE FOR EAP/CM, EEB AND E STATE PASS USTR FOR STRATFORD, WINTER, CELICO, TRANSPORTATION FOR OFFICE OF THE SECRETARY, AND OST X-1, X-40 TREASURY FOR AMB. HOLMER, WRIGHT, TSMITH USDOC FOR ITA/MAC DAS KASOFF, MELCHER AND MCQUEEN NSC FOR TONG E.O. 12958: N/A TAGS: EAIR ETRD CVIS CH SUBJECT: CONTINENTAL MAY SEEK SHANGHAI-GUAM ROUTE REF: BEIJING 2748 (U) This cable is Sensitive But Unclassified (SBU) and for official use only. Not for transmission outside USG channels. ¶1. (SBU) Stymied in its recent attempt to win approval for a New York to Shanghai route, Continental Airlines is considering starting a twice-weekly Guam to Shanghai route as early as October 2007, according to Continental Airlines Chief Representative & China Country Director H.C. Kwok. On April 25, Kwok and Continental Airlines Shanghai Sales Representative Santino Wang met with DPO Simon Schuchat, Consular Section Chief and Econoff to discuss Continental's plans and inquire about Shanghai visa processing issues. ¶2. (SBU) Kwok said that Continental had reviewed market data for several Tier Two and Tier Three Chinese cities, such as Shenyang and Wuhan. According to Kwok, the bilateral would permit them to immediately serve those destinations. However, it did not appear feasible at this time to begin daily flights between the United States and these secondary and tertiary markets in China. Nevertheless, Continental hoped to expand its "footprint" in China by flying 153-passenger Boeing 737s roundtrip between Guam and Shanghai every Monday and Friday. According to Kwok, Continental's goal was to position itself for upcoming air route discussions. ¶3. (SBU) Having checked with the General Administration of Civil Aviation of China (CAAC) in Beijing, Kwok understood that because it would not be competing with a current route flown by a Chinese airline, Continental should not have problems getting approval for its bi-weekly charter flights. Continental uses Guam as its regional hub, and believed that there was sufficient demand from Chinese tourists to such Micronesian destinations as Guam, Saipan, and Palau to merit starting the route. He speculated that Continental, in conjunction with hotels in Guam, could offer weekend packages (transportation and accommodation) in Guam for as little as RMB 5,000 (USD 650). Kwok's hope was to establish good relationships with tourist agencies in Shanghai that would market Guam as an upscale alternative to Hainan, China and other beach resorts in the Philippines, Thailand and Indonesia. Guam was a five-hour flight from Shanghai, Kwok said. ¶4. (SBU) Kwok discussed the implications of increasing visa applicants by as many as 300 applicants a week should the route be opened. He specifically inquired as to how Continental could provide information supporting the bona fides of its charters' passengers. He also expressed concern over whether or not individual applicants might be issued a single-entry, short-term validity visa with restrictive annotations. Consular Section Chief promised to review Kwok's concerns and meet again in the future should the route's opening proceed as planned. ¶5. (SBU) Note: According to Consulate Foreign Commercial Service (FCS) Officer, in 2006, FCS set up and participated in meetings on behalf of the Guam Visitors Bureau and the Hawaii Tourism Authority with China Eastern and Shanghai Airlines to discuss opening routes to Guam and/or Hawaii. China Eastern has expressed interest in this possibility. The Guam Airport Authority planned a visit to East China later this year and has requested FCS help in arranging meetings with airports. According to Guam authorities, Chinese tourists have been opting to travel to Saipan directly since there are expedited immigration procedures on direct charter flights from China. FCS had offered to assist Continental but they have not, so far, requested our assistance with routes. Continental did, however, participate in the last two FCS-sponsored U.S. Pavilions at the World Travel Fair trade show in Shanghai. SHANGHAI 00000253 002 OF 002 ¶6. (SBU) Note: In recent months, FCS has also met with the Nanjing Airport Authority and learned that they have both the capacity for and interest in receiving flights from the United States, including Hawaii and Guam. Jiangsu Governor Liang Baohua told visiting Commerce U/S Frank Lavin in a March 30 meeting that there were not yet direct flights between Nanjing and the United States although Singapore Airlines operated a profitable cargo route. Nanjing Party Secretary Luo Zhijun noted interested in a direct route and said government officials had been in discussions with both United and Northwest Airlines, with the idea that a flight might initially be routed through Tokyo (reported septel). JARRETT