Air China, United Airlines Seal Cargo-Handling Deal

Air China has agreed to handle the domestic distribution of United Airlines cargo volumes next year through the mainland carrier's hub at Beijing Capital Airport.

The deal, signed last week in Beijing, will see Air China offer United Airlines Cargo preferential rates to distribute inbound cargo but the agreement will not extend to either carriers' ex-China trade.

"This agreement will help us expand our network out of the United States into China," United senior vice-president Scott Dolan said. "We already have a good relationship [with Air China] {hellip} and we are trying to leverage that a little more on the cargo side."

Air China and United share flight designations on 45 weekly passenger flights between China and the US, Onward flights to seven mainland cities are included.

United, which is scheduled to emerge from Chapter 11 bankruptcy proceedings in the United States on February 1 next year, has re-organised to give its cargo division greater influence over destinations and aircraft it deploys, according to Mr Dolan, who is also president of United Airlines Cargo.

The carrier reported its largest and 21st consecutive quarterly loss last month - US$1.8 billion - largely due to costs associated with shedding Chapter 11 status next year. On an operating level, it posted an underlying profit of US$165 million, and cargo's contribution to the group had doubled in the past two years, Mr Dolan said.

In a recent article in the Denver Post, group chairman Glen Tilton said United Airlines Cargo was "contributing hundreds of millions of dollars to United's bottom line on an annual basis and is outperforming its plan". Any further improvement in United Airlines Cargo's contribution will lean heavily on the Asia-Pacific network where cargo generates about 14 per cent of overall revenues against 4 per cent for the group. United does not operate a freighter, carrying all the group's cargo in the bellies of its passenger aircraft.

The Air China deal will help it compete with other US carriers in the mainland and give it a head start against Continental and American Airlines, which begin flying to China in March under the Sino-US air services agreement struck in June last year.

United flies 28 times a week to Beijing and Shanghai from San Francisco and Chicago and hopes to be awarded rights to Guangzhou in March under the next tranche of the agreement's rights.

"We would really like to grow this [agreement]," Mr Dolan said. "In many respects we are just getting something started so we can see how well we work together."