VZCZCXRO4756
RR RUEHCN RUEHVC
DE RUEHGH #0072/01 0371121
ZNR UUUUU ZZH
R 061121Z FEB 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7624
INFO RUEHOO/CHINA POSTS COLLECTIVE
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 8255

UNCLAS SECTION 01 OF 02 SHANGHAI 000072 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR OASIA/INA/ WINSHIP 
DEPT FOR EAP/CM, EEP/TRA/AN 
USDOC PASS BUREAU OF ECONOMIC ANALYSIS 
USDOC FOR ITA DAS KASOFF, MELCHER, OCEA 
STATE PASS USTR FOR STRATFORD, WINTER, KATZ 
NSC FOR LOI, SHRIER 
 
E.O. 12958: N/A 
TAGS: EAIR ECON EFIN PREL EINV CH
SUBJECT: EAST CHINA CIVIL AVIATION AUTHORITY ON U.S. TRANSPORT 
ISSUES, ECONOMIC DOWNTURN, AND NEW INFRASTRUCTURE 
 
REF: A) SHANGHAI 60, B) SHANGHAI 58 
 
SHANGHAI 00000072  001.2 OF 002 
 
 
(U) This cable is sensitive but unclassified and for official 
use only.  Not for distribution outside of USG channels or via 
the internet. 
 
¶1.  (SBU) Summary:  During a February 4 courtesy call on  East 
China Regional Administration of Civil Aviation of China (CAAC) 
Director General Xia Xinghua, the Consul General (CG) raised 
several industry issues, including Polar Air Cargo's request for 
an additional slot at Pudong Airport and UPS' hub status and 
summer flight schedule request.  Xia said Polar Air could not 
shift its new slot to 10:45 pm because all new cargo flights are 
limited to departure between 2:00 and 6:00 a.m.  UPS' summer 
schedule request was only filed just prior to the Lunar New 
Year, so Xia said it had not yet been processed.  Xia declined 
to comment on UPS' hub status request, saying it is being 
handled by Beijing.  The global economic downturn has hit 
international air cargo shipments hard, while domestic passenger 
demand is relatively stable.  East China will use funds from 
China's stimulus package to augment plans already in place to 
upgrade and expand existing airports and build new airport 
facilities.  Shanghai will be prepared to accommodate the influx 
of visitors to the 2010 World Expo.  Xia welcomed cooperation 
with the Federal Aviation Administration on China's new regional 
jet, the ARJ 21.  End Summary. 
 
U.S. Express Delivery Concerns in East China 
-------------------------------------------- 
 
¶2.  (SBU) The CG queried the status of UPS' summer flight 
schedule request; Xia promised a prompt reply to UPS, explaining 
that the request had not yet been processed since it was first 
received on January 23, just prior to the LQ New Year 
Holiday, and the response usually is not issued until March 20 
anyway.  He recommended that in the future UPS apply directly to 
his office since East China CAAC can better communicate UPS' 
needs to CAAC in Beijing.  East China CAAC is also more aware of 
available slots at Pudong than CAAC in Beijing.  Xia declined to 
comment on dispute as to whether UPS has achieved hub status, 
saying only that the matter was handled by CAAC in Beijing. 
 
¶3.  (SBU) With respect to Polar Air's 10:45 p.m. slot request at 
Shanghai Pudong International Airport, Xia indicated that CAAC 
has been concerned about growing air traffic and has thus 
mandated that new international air cargo departures and 
arrivals need to occur between 02:00 and 06:00 in the morning. 
This regulation applies to all air cargo flights in China. Xia 
made it clear that CAAC would not approve requests for cargo 
flights outside of the 02:00 and 06:00 time frame.  However, he 
welcomed the opportunity to work with Polar Air to ensure they 
received a time slot between 02:00 and 06:00 in the morning. 
(Note:  DHL owns 49 percent of Polar Air Cargo.  Polar justifies 
that it qualifies for a time slot outside the stipulated air 
cargo departure times, since 40 percent of the freight is 
"express delivery" rather than strictly cargo. End Note.) 
 
Passengers Up but Cargo Down 
---------------------------- 
 
¶4.  (SBU) Xia said that cargo flights, particularly 
international cargo, have been hit hardest by the global 
economic downturn, because export orders have dropped.  However, 
the domestic passenger market is relatively unaffected; the 2009 
Lunar New Year holiday saw a 20 percent increase in air 
passengers over 2008.  He was also optimistic that more Chinese 
passengers would travel abroad, saying the appreciated RMB has 
enticed more Chinese travel overseas for shopping trips. 
 
Adding Stimulus Funds to Existing Plans for More Capacity 
--------------------------------------------- ------------ 
 
¶5.  (SBU) East China expects to build six new airports within 
the next few years, bringing the total to 44.  East China CAAC 
is also implementing the ten supportive measures issued by CAAC 
to help the air transportation industry cope with the economic 
downturn (Note: On December 9, the CAAC announced ten measures 
that it would take to mitigate the effects of the global 
economic downturn on China's civil aviation.  Measures include 
setting minimum ticket prices freezes and tightening the 
approval policy for airlines' purchasing of new aircraft, among 
 
SHANGHAI 00000072  002.2 OF 002 
 
 
other things.  End note.)  The agency will use funds previously 
earmarked for airport improvements, and also funds from China's 
newly introduced economic stimulus package, to upgrade and 
expand existing airports and build the new airports.  According 
to Xia, there is also talk of a tax cut to assist the aviation 
industry. 
 
Preparations for the World Expo 
------------------------------- 
 
¶6.  (SBU) Xia expressed confidence that Shanghai's Pudong and 
Hongqiao Airports will be able to handle the expected increase 
in flights during the Shanghai 2010 World Expo.  Hongqiao is 
scheduled to put its second runway into operation on March 28, 
2010, bringing Shanghai's total number of runways to five. 
Construction on the new Hongqiao airport terminal expansion will 
be completed in 2009; the facility will begin operation in early 
2010 (ref A).  Xia noted that Mayor Han Zheng recently visited 
the Hongqiao Airport expansion project to assess its progress. 
It will be up to the airlines to ask for additional slots for 
additional flights during the Expo period, and East China CAAC 
would do its best to satisfy their needs.  East China CAAC will 
establish a special team to organize all the flights during the 
Expo.  (Note:  The Shanghai Government estimates that 70 million 
people will visit the 2010 Shangai World Expo, including 10 
million foreigners.  End note.) 
 
Cooperation on China's New Regional Jet - the ARJ 21 
--------------------------------------------- ------- 
 
¶7.  (SBU) Xia welcomed and appreciated the U.S. Federal Aviation 
Administration's cooperation and input on the ARJ- 21 passenger 
jet being constructed in Shanghai (See ref B for further details 
on the ARJ 21).  He hoped that FAA certification would also be 
forthcoming.  Per Xia's knowledge, there have been no cancelled 
plane orders; CAAC is encouraging domestic airlines to purchase 
the ARJ 21. 
CAMP