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United Leads in China but American and Delta Want Bigger Shares

Stocks in this article: AAL DAL UAL

Chengdu, China (TheStreet) -- A San Francisco/Chengdu flight, which first operated on June 9, underscored United's (UAL) standing as the leading U.S. carrier to China.

But recently, being No. 1 to China hasn't been such a big advantage as it once was. For the moment, too many airlines are adding too much China service in too short a time.

Last week, as United added San Francisco-Chengdu on a Boeing (BA) 787, American (AAL) added Dallas to Hong Kong and Shanghai on a Boeing 777, and Delta (DAL) added Seattle-Hong Kong on an Airbus A330.

The routes and aircraft show that United is ahead, using an improved airplane and a better trans-Pacific hub to add service to a destination that appears underserved. At the same time, as the largest carrier between the U.S. and China, United has the most to lose when competitors grow.

The Chengdu flight marked the first time any commercial airline has ever flown non-stop between North America and China's interior, as well as the first non-stop flight ever from North America to a non-"tier one" city under the U.S./China bilateral aviation agreement, which Walter Dias, United's managing director for Greater China & Korea, calls "the most important bilateral relationship in the world."

The flight was made possible by two paragons of U.S. commercial aviation: United's San Francisco hub and Boeing's 787, the smallest airplane that can carry enough fuel to fly an untried 6,857-mile route. "We couldn't do the flight without the 787," Dias said. "It opens up possibilities that were not here 10 years ago." United has taken just 10 of the 65 B787s it has ordered.

The fourth-largest city in China, Chengdu is home to 14 million people. Half of the Fortune 500 companies have Chengdu offices and Ford (F)has its biggest non-U.S. plant in Chongqing, 165 miles away. In October, Marriott (MAR) subsidiary Ritz-Carlton opened a 353-room Chengdu hotel, its tenth in China.

Chengdu Shuangliu International is China's fourth-largest airport. Western airlines arrived in 2006, when KLM began Amsterdam service. British Airways began thrice-weekly 777 service in September, then switched in May to 787 service five times a week. United is starting out with three flights a day.

Chengdu paid incentives for British Airways to start service, CEO Willie Walsh said in April. Sources said United also received a break or waiver on landing fees. United spokeswoman Mary Clark declined to comment on incentives.

Dias said the Chinese government is committed to "help the west catch up" with Beijing and Shanghai. "Investment dollars are flowing from Beijing to the west," he said. The commitment includes plans to build a new Chengdu airport within five years. "We feel very bullish about Chengdu," he said. "It is very business-oriented."

As for leisure travel, Chengdu boasts the Chengdu Research Base of Giant Panda Breeding, a world-famous panda breeding site. Aviation consultant Mike Boyd called the Chengdu flight "incredible, the start of service to interior China" and said "it will pay off like a slot machine."

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