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United Airlines Gets Ready for China Rush

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Source: Media Article

Date: Jul 31, 2006

Source: Financial Times
Authors: Doug Cameron in Chicago and Kevin Done

United Airlines plans to consolidate its position as the largest carrier between the US and Asia by shifting aircraft from transatlantic service ahead of an expected scramble for additional flights to China next year.

The second-largest US carrier by revenues plans to launch an extra 40 flights a week to Asia, and last Friday agreed to sell the authority to operate its loss-making New York-London route to rival Delta Air Lines and switch its New York JFK-Tokyo service to its hub at Washington Dulles.

The twin moves reflect the focus by the US legacy carriers on building the strength of their key hub airports and switching resources to more profitable international routes, despite the improvement in domestic fare levels which have allowed most carriers to make a profit in the latest quarter.

Domestic US capacity is expected to drop by more than 1 per cent this year, despite continued expansion by low-fare rivals such as Southwest, but international capacity will rise by around 3 per cent.

Delta has embarked on the most aggressive expansion, converting aircraft flying on domestic routes to boost its presence to Latin America and Europe, increasing its international capacity by a quarter in an effort to lift the share of overseas routes from 20 per cent to 35 per cent by next year, when it hopes to emerge from bankruptcy protection.

The capture of a London service from JFK, still subject to regulatory approval, is a key part of the plan as it builds up the largest US international gateway into a true hub by adding connecting services. "We have the biggest feeder network of any US carrier at JFK," said Glen Hauenstein, Delta's executive vice-president network and revenue management:

United will drop its single service from JFK to London Heathrow in October, cutting its total flights to the airport to nine from the 13 operated during the 2005 summer season. "As we improve our financial performance, we must make certain that we take full advantage of our network strength and fly routes that provide the best revenue opportunities for United and the greatest benefits to our customers," said John Tague, United's executive vice-president and chief revenue officer.

The airline also hopes to capture some of the additional flights to China being allocated next year by the US transportation department. American, Northwest and Continental, which also operate US-China passenger services, are expected to launch fierce bids for the seven extra passenger flights a week.

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