United enters the biofuel age

NEW YORK (CNNMoney) -- United Airlines officially entered the biofuel age on Monday, by launching its first U.S. commercial flight that's partly powered by algae-based jet fuel.

United Continental Holdings (UAL, Fortune 500) said its subsidiary Continental Airlines was operating the flight on a Boeing (BA, Fortune 500) 737-800 from Bush Intercontinental Airport in Houston to Chicago O'Hare International Airport.

United said this flight makes it "the first U.S. airline to fly passengers using a blend of sustainable, advanced biofuel and traditional petroleum-derived jet fuel."

Airline industry analysts described the flight as a publicity stunt to portray the airline as eco-friendly, but it sets the stage for wider conversion to biofuels once they become cheaper.

"The idea is to validate the technical feasibility and hopefully create enough demand where the alternative energy sources become economically valid," said airline industry consultant Robert Mann.

United is the first airline in the U.S. to launch biofueled commercial flights, but not the first in the world. Dutch airline KLM started to run biofueled commercial flights in September.

Airline fuel costs spiked in 2008, prompting U.S. carriers to cut capacity by eliminating their least fuel-efficient flights. Most also added so-called ancillary fees for services that were once included in fares, such as checked bags, in-flight meals and pet travel.

The biofuel flights could eventually lead to better fuel price control for the airlines, according to analysts.

"Any of the percentage of the fuel you can transfer from this Wild West aviation fuel market to a contractual, stable agricultural-based fuel source makes this a real win," said George Hoffer, transportation economist at the University of Richmond in Virginia.

Hoffer said that for the fuel to become widely used among airlines, it will have to drop in price.

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United said it developed and tested the biofueled-engine in conjunction with Solazyme (SZYM), which develops the algae-based biofuel; Honeywell (HON, Fortune 500); and the U.S. military.

The first experimental biofuel flight in the U.S., which did not include commercial passengers, was conducted by Continental in 2009.

Virgin Atlantic was actually the first airline to put a biofueled plane in the air, with a test flight in 2008. But Virgin has not yet flown a biofueled plane with passengers.