This story has been corrected because it originally referred to Air China as the fifth airline to fly LAX-Shanghai. In fact Air China's service is a cargo flight that does not carry passengers.
NEW YORK (TheStreet) -- Delta (DAL - Get Report) surprised the airline industry last week, saying it will become the fourth passenger airline and the third U.S. airline to fly non-stop between Los Angeles and Shanghai. Service begins July 9.
In the first place, despite being the second busiest U.S. airport, Los Angeles International Airport is a tough place for U.S. airlines to offer Asia service, not only because the airport lacks the space required for any carrier to build a true hub but also because desired fare levels can be undercut by foreign competitors.
Also, Delta is building a trans-Pacific hub at Seattle-Tacoma International Airport, where it faces less competition, which is not to say that building a hub in a place where Alaska already has one is easy. From Seattle, Delta serves the top five Asia markets: Beijing, Hong Kong, Seoul, Shanghai and Tokyo.
On Tuesday, during Delta's fourth-quarter earnings call, route planning genius Glen Hauenstein, who built Continental's Newark hub -- now operated by United -- then oversaw Delta's vast international expansion following its bankruptcy, explained the logic of LAX-Shanghai service.
"The one thing that's happened in the last few months is the extension of the Chinese visa program," Hauenstein said. "That was unexpected and so we've seen a significant increase from demand from China."
In November, the U.S. and China agreed to issue tourist and business visas that will be valid for 10 years, up from one year. The White House estimated the change could mean as many as 7.5 million visitors to the U.S. from China in 2021, up from 1.8 million in 2013.
Additionally, Delta and partner China Eastern are moving to share a terminal at Shanghai Pudong International Airport (The code is PVG).
"We're already connecting a little less than 200 people a day in Shanghai to points in interior China," Hauenstein said. "Starting in April we'll be able to reduce our minimum connect times and we'll be able to better connect to those points in China.
"We saw that the opportunity combined with a dramatic increase in Chinese visitors and the Chinese economy," he said. "This is something that was in our five-year plan and we just saw an opportunity to accelerate it given some exogenous events that all seemed to sync up at once."
The new flight aboard a Boeing 777-200LR seating 291 passengers will mean that Delta will offer 42 weekly flights to Shanghai from hubs in Detroit, Los Angeles, Seattle and Tokyo. Delta also serves Beijing from Seattle and Detroit.
Besides the U.S. carriers, China Eastern also provides service between LAX and Shanghai.
Despite the new flight, Delta is still playing catch-up in China, where United remains the market leader. While American and Delta are still adding new routes to Hong Kong and the three major destinations in mainland China, United is filling niches in its service.
Last month, United said it would expand its San Francisco-Chengdu service from three weekly flights to daily during the summer. United, the only carrier that flies non-stop between the U.S. and interior China, said expanded service was enabled by higher-than-expected leisure traffic originating in Chengdu.
Additionally, United said it will add a second daily San Francisco-Shanghai flight between May 6 and Oct. 24. That flight is intended to serve business travelers who want to leave Shanghai in the evening.
-- Written by Ted Reed in Charlotte, N.C.
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