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Mon, Apr 14, 2008

United Postpones New China Service By At Least A Year

Blame It On Oil Prices, Carrier Says

United Airlines said Monday it will postpone the launch of nonstop service between San Francisco and Guangzhou by one year, blaming surging fuel prices.

As ANN reported, United was awarded the new route to China by the US Department of Transportation late last year; the airline must get DOT's okay for the delay. CBS Marketwatch reports the second-largest US carrier has applied for agency approval. Service was originally planned to start June 18.

In an official statement, United said it originally made plans for the service based on oil at $72 a barrel. "With prices in excess of $100 US a barrel today, we face a cost increase of more than $2 billion," the carrier said Monday.

So... why not just raise ticket prices to compensate, or add a fuel surcharge?

Industry experts say airlines typically must offer steep ticket price discounts to attract demand on a new route, and make up the loss elsewhere in the company's operation. With fuel prices where they are now, that's not possible.

The airline's reiterated that "United remains committed to serving China, the airline's fastest growing market in the Asia-Pacific region."

There are currently seven nonstop US-China routes. United flies five of them, with Continental Airlines Inc. and American having one each.

FMI: www.united.com, www.dot.gov

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