U.S. picks United for first non-stop China route, beats out key rivals

WASHINGTON (AP) - United Airlines has won tentative approval from the U.S. government to operate the first-ever non-stop daily flight between the United States and China - a route potentially worth US$200 million a year. The Department of Transportation's approval gives UAL Corp.'s United a critical head start over its competitors on the highly coveted, burgeoning market.

The Elk Grove Village, Ill.-based airline can begin non-stop service between Washington Dulles International Airport and Beijing's China Peking Capital Airport on March 25 if the tentative decision becomes final, the government said.

United beat out AMR Corp.'s American Airlines, which sought to fly between Dallas/Fort Worth and Beijing; Continental Airlines Inc., which applied for service between Newark, N.J., and Shanghai; and Northwest Airlines Corp., which applied for Detroit-Shanghai service.

"Interested parties have 14 days to file objections showing why today's tentative decision should not be made final," the Transportation Department said in a release. If objections are filed, answers are due in seven days and the department then will review comments and issue a final decision.

The new route will strengthen United's extensive Pacific network and provide an injection of cash when the carrier is still trying to regain its former financial strength after a three-year bankruptcy restructuring that ended in February.

Airline analyst Roger King estimated that the route could bring United roughly $200 million a year in additional revenue, based on daily 25,750-kilometre round-trip flights. The flights, he said, are certain to draw businessmen and politicians willing to pay first-class fares.

"It further cements their dominant position among the American carriers in Asia and adds to their merger value," said King, airline sector analyst at CreditSights Ltd.

The cachet of capital-to-capital flights was probably the deciding factor in United winning the route, he said.

The government said United's proposal had the potential to benefit the greatest number of passengers since more people travel to China from the Washington metro area. United's service also would provide the greatest capacity, offering more than 253,000 seats annually, according to the government.

Transportation Secretary Mary Peters said the final choice was difficult, but "ultimately the goal is to do everything in our power to expand service, destinations and frequencies between the United States and China."

"United Airlines is honoured to be selected as the first carrier to connect the governments, commerce and cultures of these two important capital cities," Glenn Tilton, United chairman, president and chief executive, said in a prepared statement.

American Airlines tried to make a last-minute change to its proposal to add a stop in Chicago before continuing to Beijing, but the government on Tuesday denied that motion. Any amendment this late in the proceeding would "significantly delay the start of new service," the Transportation Department said. It allowed the carrier to withdraw its application as requested.

The department evaluates U.S. air carrier proposals for new U.S.-China service as part of an aviation agreement between the two countries signed in July 2004 that called for a total of 195 new weekly flights phased in over a six-year period.

Shares of United parent UAL Corp. added seven cents to $46.87 in afternoon trading on the Nasdaq stock market, while AMR rose 16 cents to $33.53, and Continental added 46 cents to $45.08, both on the New York Stock Exchange.

© The Canadian Press, 2007