United Increases Boeing 787 Chengdu Flights, Thanks to Chinese Tourists

NEW YORK ( TheStreet) --  United (UAL) expected its historic San Francisco-Chengdu flight to succeed to the point that it would expand the service, and that is exactly what has occurred.

The surprise is that success has been enabled by higher-than-expected leisure traffic originating in Chengdu. That traffic prompted the carrier to announce this week that San Francisco-Chengdu service will increase from three weekly flights to daily between June 4 and Sept. 1, 2015.

"We have a first-mover advantage," said Brian Znotins, United's vice president of network. "We have schedule coverage, a strong base of business traffic, and the best U.S. gateway to the Pacific. These are all competitive advantages. Not to say that new flights {by others} are without impact, but China remains a very strong performer for us. We are not going to give up the leading competitive position in one of the most important markets in the world."

Znotins said United's success in China had been long predicated on demand rising faster than overall capacity. Now that various carriers have been boosting capacity, "results come back to more run-rate performances," he said. But United's China operations remain profitable, as they have been for years.

In the case of San Francisco-Chengdu, United began service on the 6,857-mile-route in June. "When we forecast the route we felt the right level of capacity was three times a week, and then we found that summer loads and results exceeded expectations," Znotins said.

"One of things a lot of economists talk about is the growing size and strength of the middle class in China," he said. It is that trend that allowed for more China-origination leisure traffic than United anticipated. He declined to provide a percentage of China origination traffic.

United's San Francisco/Chengdu flight is the U.S. flight that best exemplifies the potential of the Boeing (BA)  787 Dreamliner to open new frontiers in travel. A relatively small plane, carrying just 219 passengers, is now able to fly an ultra-long route: in the past, only larger planes could carry enough fuel to fly so far.

"These are precisely the kinds of routes that Boeing had in mind when it designed the 787," said aerospace consultant Scott Hamilton. He said Norwegian Air Shuttle's flights from Bangkok to Oslo and Stockholm also fall into the category of longhaul flights made possible by the 787.

United already flies San Francisco/Shanghai with a Boeing 747 seating 374 passengers. The aircraft arrives in Shanghai at 6:35 p.m. and returns at 1:45 p.m. the next day. The new flight aboard a 777 will not overnight in Shanghai, but rather will turn around and depart at 9 p.m. "A business passenger in Shanghai can finish meetings and then return rather than overnight," Znotins said.

United already operates an evening Shanghai departure for Los Angeles: it often carries passengers bound for San Francisco.

"We pride ourselves on going to businesses in the Bay Area and on offering more non-stops to everywhere they want to go," Znotins said. "It's a very symbiotic relationship and it's incredibly valuable to us. People are willing to be loyal -- business traffic comes to us."

-- Written by Ted Reed in Charlotte, N.C.

To contact this writer, click here.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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