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United Pursues Chengdu Route - Analyst Blog

Posted
8/30/2013 6:20:00 PM
By: Zacks.com
Referenced Stocks:BA;DAL;DOT;LCC;UAL

United Airlines - the wholly owned subsidiary of United Continental Holdings Inc. ( UAL ) -announced that it is waiting for the Department of Transportation's (DOT) nod to start non-stop flights from San Francisco to Chengdu in China. United expects to launch the new service on Jun 9, 2014.      

Chicago based United plans to operate three non-stop flights in a week between the route, with the Chengdu bound flight taking approximately 14 hours 15 minutes, and the San Francisco bound flight taking 13 hours 50 minutes. The non-stop flight will take approximately 4 hour less than the standard time taken to fly between the route via connecting service.   

United plans to use The Boeing Co. 's ( BA ) 787-8 Dreamliner for the new route, the first to be taken by a carrier beyond Shanghai in China. If approved, the San Francisco-Chengdu route will mark the ninth destination for United in the Asia Pacific region, where the carrier offers non-stop flights.

Additionally, United has a strategic alliance with Air China Limited, which operates flights to 59 different destinations from Chengdu. United passengers willing to move to other parts of China will get the added benefit of connecting flights within Air China's operating routes.

The Asia-Pacific region has become one of the most important destinations for U.S. passenger carriers given the bullish sentiment on the region based upbeat trade flows and business activities. U.S. carriers continue to add non-stop flights to woo corporate customers travelling from the U.S. to Asia and vice-versa. Recently, Delta Airline Inc. ( DAL ) announced that it will launch daily non-stop flights from Seattle to Seoul and Hong Kong.

According to IATA (International Air Transport Association) Asia Pacific will remain one of the most profitable destinations in 2013, with the majority of flights coming from China, Japan and some other long haul routes. Hence, we believe that adding a non-stop service in this region will only expand United's network and profitability.

Chengdu is the capital of Sichuan province with 14 million habitats and is also the fourth largest city in Mainland. It is also one of the most developing cities within China and currently has 200 of the Fortune 500 companies.

United currently carries a Zacks Rank #3 (Hold). However, sector stock U.S. Airways Group Inc. ( LCC ) looks attractive with a Zacks Rank #1 (Strong Buy).



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