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United Continental (UAL) Aims to Broaden Chinese Footprint

In line with its efforts to expand further, Chicago-based United Continental Holdings UAL has inked a multi-year deal with premier Chinese carrier Air China. We note that United Continental and Air China are no strangers and their partnership dates back to 2003.  The carriers already operate numerous flights on various routes connecting the U.S. and China through their codesharing agreements. The new deal will be an opportunity to cement their ties further.

Apart from the new deal, the carriers have also established a joint strategic initiative aimed at benefiting fliers in the two countries. The new initiative, which will be monitored by senior officials of the carriers through regular meetings, is aimed at enhancing connectivity between the nations apart from augmenting joint marketing efforts to improve the quality of their offerings. The carriers, who are both members of the Star Alliance, intend to bring in further customer-related benefits through their current endeavor.

United Continental currently operates non-stop flights connecting San Francisco with three mainland China destinations. The carrier intends to fly to two more destinations in mainland China (Xi'an and Hangzhou) from San Francisco later this year.

United Continental’s effort to expand further in China is a prudent one given the lucrative nature of the Chinese market that holds significant commercial potential. We note that United Continental and Air China have transported in excess of 2.7 million passengers between the two nations in 2015. We believe traffic will further increase this year, courtesy this customer-friendly move.

Incidentally, United Continental is not the sole American carrier looking to extend its Chinese footprint. Earlier in the month, Atlanta, GA-based Delta Air Lines DAL too announced its plans to boost its Chinese presence as part of its efforts to tap key Asian markets.

Zacks Rank

United Continental currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the airline space include Hawaiian Holdings HA and Deutsche Lufthansa Aktiengesellschaft DLAKY. Both the stocks sport a Zacks Rank #1 (Strong Buy).

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