=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/c/a/2005/03/27/BUGLKBV4JE= 1.DTL --------------------------------------------------------------------- Sunday, March 27, 2005 (SF Chronicle) Asia flights brighten sky for airlines/Carriers vie for passengers as airpo= rt opens in Japan David Armstrong, Chronicle Staff Writer Nagoya, Japan -- The dogfight for dominance in the high-flying Asia Pacific market heated up Saturday when United Airlines' maiden flight 831 touched down at this industrial city's new $7.3 billion airport en route from San Francisco. International air traffic is proving increasingly important to tradition= al U.S. carriers such as United and Northwest Airlines, which have been hard-pressed at home by the growth of low-cost carriers that have kept ticket prices down and gobbled up 25 percent of the domestic U.S. market. Foreign routes are especially important to bankrupt United, which draws = 31 percent of its total revenue from international travel -- 16 percent from Asia alone -- and looks to continued growth in foreign travel as a key to its eventual exit from Chapter 11 bankruptcy reorganization. But United doesn't have a clear flight path across the Pacific. United rival Northwest Airlines is also increasing its long-established transpacific service, and premier Asian airlines such as Japan Airlines, All Nippon Airlines, Singapore Airlines and Hong Kong's Cathay Pacific Airways are also in the thick of the competition. And no wonder: Asian economies continue to expand, led by China's sizzli= ng 9.5 percent growth in gross domestic product last year. Japan has shown strong signs of recovering from its 1990s slump, putting more money in the pockets of millions of affluent Japanese consumers. Passenger traffic to and around the Asia Pacific region soared 20.6 percent last year from its 2003 level, well ahead of the world average 15.3 percent, according to the International Air Transport Association. Asia Pacific countries accounted for $4 billion in revenue to U.S. carriers in 2003, an otherwise down year described as SARS-depleted by John Heimlich, chief economist of the Air Transport Association of America, an industry trade group. "I imagine it has doubled or more than doubled by now," Heimlich said. "There is a very strong post-SARS and post-war recovery." U.S. airlines such as United and Northwest are in an enviable position to grow in this region because they are the chief beneficiaries of governmental bilateral aviation treaties that allow them to add flights on these prized routes while restricting the number of competitors, Heimlich noted. "We are shifting more and more of our fleet to the international market,= " United's Japan sales manager Barry Bergmann said in Tokyo recently. United has flown to Japan, which accounts for 40 percent of its Asia Pacific revenue, since the 1980s, calling on Tokyo's Narita airport and Osaka's Kansai airport. Now, United, the dominant carrier at San Francisco International Airport, has started daily flights from SFO to Nagoya, a city of 2.2 million people in Japan's industrial heartland, near the headquarters of Toyota, Honda and Suzuki. The airline is focused on luring business travelers onto the new flight because they typically pay higher fares than do vacationers. "They are high-yield passengers," Bergmann noted. United is charging $6,443 for a round- trip business class ticket between SFO and Nagoya, though the airline also offered introductory round-trip coach fares as low as $298. United originally planned to begin its service to Nagoya from SFO, which handles more than 90 percent of the Bay Area's international flights, in June. But it was moved up to Saturday, Bergmann said, in hopes of snaring traffic to World Expo 2005, a world's fair near Nagoya that opened Friday with pavilions from 120 nations, including the United States. United also recently reached agreements with All Nippon Airways, allowing passengers to transfer to eight or nine secondary Japanese cities from United flights originating in the United States, Bergman said. United's new Nagoya service takes passengers to gleaming Centrair airpor= t, which opened last month on a man-made island serviced by trains, expressways and high-speed ferries. It comes just months after the Chicago carrier began daily nonstop service between SFO and Beijing in June and began flying daily between SFO and Ho Chi Minh City in December. United's ambitious Asian expansion is hardly going unchallenged, however. Northwest, which has flown between the United States and Asia since 1947 and operates 11 daily international and domestic flights from SFO, is striving to attract passengers -- especially free-spending executives -- by upgrading its business class, implementing a futuristic in-flight entertainment system and introducing a new generation of aircraft. "International for Northwest is a large and very important part of our network," said Laura Liu, Northwest's vice president of international marketing and revenue. Northwest, she said, operates a busy hub at Tokyo Narita airport which allows the Minnesota carrier to offer quick transfers to passengers heading to China and throughout Japan. "Our history and our experience gives us a leg up in the market," Liu sa= id of Asia. Northwest also flies to the new Centrair airport, offering daily service between the automotive centers of Detroit and Nagoya. Nagoya's new Centrair is just the latest of half a dozen major international airports that have opened in Asia in recent years, a contributing factor in the rise of commercial aviation in the region. It follows the opening of built-from-scratch airports in Shanghai; Guangzhou, China; Kuala Lumpur, Malaysia; Seoul/Inchon; and Hong Kong. The airlines are adding the latest touches in comfort to coddle customers on flights between Asia and the United States, which can easily top 10 hours. Northwest recently introduced flatbed seats in business class with 60 inches between rows, installed 10-inch video screens at each business class seat, and rolled out an in-flight entertainment system that offers TV shows, music, games and movies on demand. The same entertainment system is available on 6-inch seatback screens in economy class, she said. Northwest also introduced Airbus A330-200 aircraft on its SFO-Tokyo flig= ht in October. The planes are said to be quieter than the DC10-30s they replaced and some 30 percent more fuel efficient. "Out of SFO, we are very competitive," said Liu, who said Northwest has flown to Asia from San Francisco since 1969. "We are still focused on Japan," she said, but added that Northwest is eying opportunities in China, too. "Our whole industry is very excited about China. It's a growth opportunity that's out there," she said. Recent liberalization of the U.S.-China aviation treaty has allowed American Airlines and Continental Airlines to plan limited service to China this year and next. American, which has a reciprocal agreement with Japan Airlines to sell tickets on each other's flights, is also a high-profile corporate sponsor of the U.S. pavilion at World Expo 2005. But Northwest and United remain far ahead among U.S. airlines serving Asia, especially China and Japan -- lucrative markets also coveted by leading Asian carriers. Asian airlines such as Singapore Air are known for attentive service as well as light touches and technical innovations designed to please the picky passenger. Japan Airlines, which has flown between San Francisco and Tokyo since 1954, also has flatbed seats in business and first class, and Cathay Pacific has pioneered the use of in-flight e-mail systems. Anything that can give an airline an edge is likely to come into play. To localize its new Nagoya service, United has added Japanese comfort food to the airborne menu, serving morsels such as grilled shrimp over rice. The growth in passenger business in the Asia Pacific region has been paralleled by a growth spurt in air cargo. While most trade goods cross the Pacific by ship, fast air cargo is becoming more important in the age of just- in-time delivery, said Heimlich of the Air Transport Association. Indeed, Nagoya's new Centrair was built nearly as much to handle cargo as to move human beings, said Tetsuya Takahashi, senior manager in the airport's sales and marketing division. "We are in the manufacturing center of the country," Takahashi said. "The big companies here wanted an airport with greater capacity than Nagoya's old one. And they wanted a facility that could operate 24 hours a day," he said, as big jets rolled down the runway outside the airport conference room. A senior executive from Toyota, Japan's largest carmaker, directed the four-year construction of the airport -- built with half government money and half corporate funding -- and brought it in under budget. Centrair makes a big difference to air cargo shippers such as FedEx, whi= ch previously had to fly shipments bound for the industrial heartland to Tokyo or Osaka, both several hours distant, then move them to Nagoya by expensive trucks or railroads, FedEx spokesman Ed Coleman said. FedEx has started five new weekly flights between SFO and Centrair to handle anticipated new business, Coleman said. One FedEx customer using the new flights is Building Material Distributors, a company based in Galt (Sacramento County) that has been doing business in Japan for a dozen years and specializes in exporting windows, doors, cabinets and other items for upscale, Western-style houses. "There was a condo builder in Nagoya that got the wrong windows," recall= ed Alan MacDougall, Building Material Distributors' international sales manager. "He had $500-an-hour siding guys standing around, waiting." Now, with the new direct service, such situations shouldn't be a problem, as air cargo can be shipped directly, without costly and time-consuming transfers from other cities, MacDougall said. Building Material Distributors does 80 percent of its business with high- end clients in Japan, but it is beginning to edge into China as well, he said. The company is selling materials to builders of a new development of Western- style mansions in Beijing, called Napa Valley. "I think the Pacific Rim is poised for another quantum leap," MacDougall said. E-mail David Armstrong at davidarmstrong@xxxxxxxxxxxxxxxx --------------= -------------------------------------------------------- Copyright 2005 SF Chronicle