American cuts second U.S.-China flight on fuel cost, rivalry

DENVER (Reuters) – American Airlines (AAL.O) is cutting a route between Chicago and Shanghai, canceling the second direct flight from the U.S. city to China in four months, because of higher fuel costs and competition, the carrier said on Tuesday.

FILE PHOTO: An American Airlines Boeing 737-800 plane takes off from Los Angeles International airport (LAX) in Los Angeles, California, U.S. March 28, 2018. REUTERS/Mike Blake/File Photo

The service is not sustainable with high fuel costs, Vasu Raja, American’s vice president of network and schedule planning, said in a statement. “We have opportunities to be successful in other markets.”

American, the largest U.S. carrier by passengers, cut a flight from Chicago to Beijing in May.

Hawaiian Airlines [HAII.UL] also said on Tuesday it would suspend its thrice-weekly nonstop service between Honolulu and Beijing.

China’s aviation regulator said in May it would ease its near decade-old “one route, one airline” policy for Chinese airlines, allowing increased competition on long-haul international routes.

“U.S. airlines are at a severe disadvantage. The majority of the demand is China-generated, and that gives Chinese carriers the advantage,” Mike Boyd, president of aviation forecaster Boyd Group, said, adding that fare yields are under pressure.

Chinese passengers arriving at U.S. airports are expected to nearly triple from 4.3 million in 2018 to an estimated 12.8 million in 2024, and the profile is shifting from groups to independent travelers, according to a Boyd Group market forecast.

United Airlines (UAL.N) President Scott Kirby said Shanghai and Beijing had rebounded for the airline after several years of weakness, although revenue per available seat mile (RASM) was below levels of two or three years ago.

“We’ve had several years of weakness as there was an awful lot of capacity growth out of Beijing and Shanghai,” Kirby said on the sidelines of the International Aviation Forecast Summit in Denver.

United offers 12 daily flights between U.S. airports and China and Hong Kong, after ending a route between Hangzhou and San Francisco in 2017.

American, which took a stake in China Southern Airlines Co Ltd (600029.SS) in 2017 for $200 million, still operates daily flights to Beijing from Los Angeles and Dallas-Fort Worth, Texas.

Delta Airlines (DAL.N) has seven daily flights to China, supported by its codeshare and equity partnership with China Eastern Airlines (600115.SS). Delta bought 3.55 percent of China Eastern for $450 million in 2015.

Reporting by Allison Lampert in Denver; Editing by David Gregorio, Susan Thomas and Richard Chang

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