*

Chinese airlines benefit from reduced flight time and fuel

burn

using Russian airspace

*

US carriers have not been allowed to fly over Russia since

2022

*

Cargo-only flights not included in US proposal

(Adds trade war context in paragraph 2, proposal does not apply

to cargo-only flights in paragraph 5, Cathay Pacific details in

paragraph 9, Chinese airline shares in paragraph 11)

By David Shepardson and Lisa Barrington

WASHINGTON, Oct 9 (Reuters) - The Trump administration

on Thursday proposed banning Chinese airlines from flying over

Russia on routes to and from the United States, saying the

reduced flight time this practice enables puts American carriers

at a disadvantage.

The proposal is another escalation of the trade war between

the world's two largest economies and was announced after

Beijing on Thursday tightened controls for rare earths exports

crucial for some U.S. industries.

U.S. airlines have long criticized the decision to allow

Chinese carriers to use Russian airspace on U.S. routes because

it gives them the advantage of decreased flying time and burns

less fuel, lowering costs.

Russia has barred U.S. airlines and many other foreign

carriers from flying over its airspace in retaliation for

Washington banning Russian flights over the U.S. in March 2022

after the country invaded Ukraine.

Chinese airlines were not banned and have been using this

advantage to increase market share compared to non-Chinese

carriers on international routes.

The U.S. Transportation Department said on Thursday in its

proposed order the current situation was "unfair and has

resulted in substantial adverse competitive effects on U.S. air

carriers."

The current proposal to apply the overflight restriction

to U.S.-issued foreign air carrier permits does not apply to

cargo-only flights, it added.

The Transportation Department's decision could affect some

U.S. flights operated by Air China, China Eastern

, Xiamen Airlines and China Southern.

The order did not name Hong Kong-based airline Cathay

Pacific, which overflies Russia on its New York to

Hong Kong route, according to flight tracking website

Flightradar24. Cathay did not immediately respond to a request

for comment.

China's aviation regulator, the Chinese embassy in

Washington and Airlines for America, a major trade group

representing carriers American Airlines ( AAL ), Delta Air Lines ( DAL )

and United Airlines that all fly to China, did

not respond immediately to requests for comment.

Chinese mainland-listed shares in the country's three

biggest airlines fell slightly on Friday. Air China was down

1.3%, China Southern fell 1.8% and China Eastern slipped 0.3% by

the middle of the day. The state-owned carriers have struggled

since the pandemic, posting five consecutive years of annual

losses.

TRADE TENSIONS

The proposal to ban Chinese airlines from using Russian

airspace on U.S. routes comes amid growing tensions between

Beijing and Washington over a series of economic issues.

Boeing ( BA ) is in talks to sell as many as 500 jets to

China, which would represent a major breakthrough for the

company in the world's second-largest aviation market, where

orders have stalled amid U.S.-China trade tensions.

U.S. President Donald Trump and his Chinese counterpart Xi

Jinping are expected to hold a face-to-face meeting in South

Korea at the end of October.

The Transportation Department is giving Chinese carriers two

days to respond to its proposal and said a final order could be

in effect as soon as November.

In May 2023, the U.S. approved additional flights by Chinese

carriers after they agreed not to fly over Russia on new routes,

Reuters reported.

Last year, the Transportation Department said Chinese

passenger airlines could boost weekly round-trip U.S. flights to

50 but opted not to add more flights after pressure from U.S.

unions and airlines.

More than 150 weekly round-trip passenger flights were

allowed by each side before restrictions were imposed in early

2020 due to the COVID-19 pandemic.

Some U.S. carriers have told the Trump administration that

direct East Coast flights to China are not economically feasible

if they do not fly over Russia. In some cases, carriers must

leave some seats open and reduce cargo because of the increased

flight length.