Chicago-Headquarted United Airlines will begin scheduled services from Los Angeles to China’s most densely populated city of Shanghai from May 19th, 2011. The service is set to be operated on a daily basis with B777 equipment on a route that has seen over 194,000 O+D passengers travel between July 2009 and July 2010. Shanghai based China Eastern currently has a 67% share of this market with its daily service. Competition on this sector will also be intensified in April, 2011 when oneworld member American Airlines will begin a daily service, also with B777 equipment.
United already operates a number of services into Shanghai with a daily rotation from Newark, Chicago and San Francisco and an extension flight between Beijing and Shanghai.
The United and Continental merger is motivating a number of new routes, and its decision to add service between the US and China would seem to suggest that confidence in this market is returning. The global financial crisis led to a number of planned services between the US and China being postponed or cancelled such as US Airways’ planned Philadelphia to Beijing service. Long sector lengths and some very weak yields in all cabins made these services uneconomic.
United is in fact the market leader between the US and China in terms of flown passengers as the table below illustrates.
|
Airline |
Passenger Numbers (Two-Way, July 2009-July 2010) |
Market Share |
|
United Airlines |
798,791 |
28% |
|
Air China |
494,382 |
17% |
|
Continental Airlines |
315,982 |
11% |
|
China Eastern |
268,038 |
9% |
|
American Airlines |
166,694 |
6% |
|
Cathay Pacific |
161,923 |
6% |
|
Delta Air Lines |
159,398 |
6% |
|
Northwest Airlines |
154,378 |
5% |
|
Korean Air |
85,508 |
3% |
|
China Southern |
84,278 |
3% |
|
Others |
208,455 |
8% |
|
Total |
2,897,827 |
100% |
Source:IATA BSP data July 2009-July 2010
Note that Delta Air Lines and Northwest Airlines has been captured separately, although both airlines now operate under the Delta umbrella.
United now has the expanded network at Los Angeles with its merger with Continental Airlines and will have significant domestic feed. The combined entity has 20% share of all scheduled flights at Los Angeles. In Shanghai, the Star Alliance carrier will no longer be able rely on the connectivity that would have been offered by Shanghai Airlines, the carrier which was taken over by SkyTeam member China Eastern terminated its Star Alliance membership earlier this year
Star Alliance will have limited connectivity at the Chinese end of the route. Air China has a limited presence in Shanghai. It is the fourth largest carrier in Shanghai with a 10% share of scheduled traffic.
In Shanghai, the majority of domestic traffic is fed into Hongqauio Airport and Star Alliance does not have the strength in Shanghai that it does in Air China’s home market of Beijing.
However there should be enough corporate traffic to sustain the new route, the existing Shanghai to Los Angeles route has seen over 11,000 business class passengers fly between July 2009 and July 2010. With an improving economic climate there is no reason why additional capacity will not be a success into one of the largest cities of the most populated country in the world.
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