According to a report on AINonline, United Continental Holdings UAL, the parent company of United Airlines,has announced that it intends to add more flights to China. The decision follows the obstacles encountered by the carrier pertaining to its service to India, owing to Middle East carriers relentlessly adding capacity.
We note that United Continental currently operates nonstop flights on a daily basis from New York to New Delhi and Mumbai in India. However, according to a businesstraveller report, the carrier won’t expand its services further in India, in view of the excessive “unfair” competition originating from Middle East carriers.
United Continental, which already offers more non-stop flights to China compared to any other U.S. carrier, aims to expand further in the country despite its ongoing economic slowdown. Increased travel to and from China is the key factor driving the decision. Currently, San Francisco is the carrier’s main hub for its Chinese service. However, the company plans to add more U.S. hubs in the future as it aims to expand its operations to secondary cities in China like Chengdu. We note that in September this year United Continental had announced plans to initiate non-stop weekly flights between San Francisco and Xi'an, from May 2016. We expect investor focus to remain on updates pertaining to United Continental’s efforts to expand its Chinese footprint.
The roadblocks faced by United Continental with regard to its Indian operations, courtesy the overcapacity issues created by Middle East carriers, represents another episode in the ongoing tussle between some U.S. carriers and their Gulf counterparts. Earlier in the month, United Continental had announced that it will discontinue flights connecting Washington Dulles International Airport and Dubai from late Jan 2016.
Early this year, United Continental, along with American Airlines Group AAL and Delta Air Lines DAL, had complained to the Obama administration that the massive subsidies and other benefits enjoyed by the three Gulf airlines – Qatar Airways, Etihad Airways and Emirates – were unfair in nature and denied a level playing field to the American carriers.
To mitigate the threat posed by the Middle East carriers to its Indian operations, United Continental is looking to enter into a codeshare agreement with India’s premier carrier, Air India, according to the AINonline report. Currently, United Continental has a codeshare pact with India’s Jet Airways. However, with Etihad Airways being one of the stakeholders in Jet Airways, the future of the codeshare pact appears in doubt in the event of the deal with Air India materializing.
Zacks Rank
United Continental currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the airline space isAlaska Air Group ALK with a Zacks Rank #2 (Buy).
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