American Takes on United Airlines with Service to Shanghai

While American Airlines kicked off its first nonstop service to China with dancers and dragons, things were much quieter at the United Airlines gate.


SHANGHAI - While American Airlines kicked off its first nonstop service to China with dancers, dragons and an Asian buffet at Chicago O'Hare Airport, things were much quieter at the United Airlines gate.

United has had its own nonstop flight from Chicago to Shanghai since 2004. But on Sunday morning, United officials were no doubt painfully aware of American's presence, facing a competitor on that route for the first time.

And United, which emerged from bankruptcy protection early this year, is likely to bump up against Fort Worth, Texas-based American even more in the future, as American expands further into Asia.

"American and United are always going to be big rivals, and China is no different," said Alan Sbarra, an airline analyst with Roach and Sbarra. "I expect them to compete really hard."

American fired its first shot in the battle for Shanghai this week, launching nonstop service amid the thunder of drummers, costumed dancers and, most importantly to the airline, enough passengers to nearly fill a Boeing 777 airplane.

The airline spent 14 years lobbying for nonstop flights to China. The inaugural flight was an important moment for American executives who see expanded international service as a cornerstone of their turnaround strategy.

"We hope this is only the beginning of our expansion into China," said Henry Joyner, American's senior vice president of planning, who flew on the first trip.

Until recently, only United and Northwest Airlines were allowed to fly nonstop from the United States to China. United gained its China routes in the 1980s, when it bought them from ailing Pan Am, which was then in bankruptcy.

American won permission to launch its Shanghai flight last year, when it beat a competing proposal from Delta Air Lines. Continental Airlines was also granted permission to fly to China, and began service to Beijing from Newark Airport last year.

American hopes to boost revenues by expanding service in Asia, one of the few remaining markets with little or no competition from low-fare competitors. The growing business market in China also attracts business travelers who are willing to pay a stiff price tag for premium service on the 14-hour flight.

But it isn't alone. United has also shifted more of a focus to international travel, and enhanced many perks as it tries to lure business travelers.

United hopes to leverage its long history of flying to China to prevent as many passengers as possible from defecting to American.

"This is a great market for U.S. passengers because there's a predisposition among many American travelers to fly a U.S. airline, rather than one of the Chinese carriers," Sbarra said. "That's one of the reasons the routes are so attractive."

In addition to United, American could see some competition from Delta Air Lines, which has requested a route to Shanghai from Atlanta.

Additional routes are expected to be approved by the U.S. Department of Transportation over the next four years.

But while the airlines are expected to be competitive, the rivalry isn't likely to translate into dirt-cheap fares to China, said Terry Trippler, an analyst with Cheapfares.com, an Internet travel site that monitors airline ticket prices.

"Don't expect a fare war on that route," he said. More likely is a battle over service, as each airline attempts to outdo the others and lure well-heeled business travelers, he said.

He pointed out that several airlines serve Tokyo nonstop from New York, and "we've never seen a fare war there."

American tried hard to make a good first impression with travelers.

When passengers deplaned in Shanghai, they were greeted by scores of Chinese dignitaries. Officials with China's aviation commission praised American executives and said the flight was a significant advance for business in both countries.

Grace McDermott of Arlington said she was "thrilled" to be on the first flight.

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