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