United May Revive West Coast Shuttle
United Airlines parent UAL Corp. hopes to use its bankruptcy proceedings to form a subsidiary discount airline -- perhaps on the West Coast -- to better compete against low-fare rivals, UAL’s chief executive said Thursday.
Details of the new service are still being developed and are subject to negotiation with United’s unions. But the company plans to launch the new airline sometime next year, UAL Chairman and CEO Glenn Tilton told reporters at Washington Dulles International Airport.
“The low-cost-carrier phenomenon is drawing customers away from the main lines” such as United, Tilton said. “We need to take advantage of that.”
Tilton noted United’s former West Coast shuttle as an earlier attempt to challenge Southwest Airlines Inc. and other low-cost competitors. A United spokesman, Chris Brathwaite, said that “doesn’t mean the shuttle itself is coming back,” but he said the new discount carrier might start on the West Coast.
If launched, United’s new airline would heighten competition for passengers flying within the West. The market is dominated by Southwest, which has more than 60% of intra-California passenger traffic, analysts estimate. Smaller low-fare airlines such as JetBlue Airways Corp. also have boosted service in the West at the expense of United and other network carriers.
Even as cash-strapped United filed for Chapter 11 bankruptcy protection Monday, Tilton said California would remain a priority at the airline, which is based in Elk Grove Township, Ill. United has the biggest market share at the Los Angeles and San Francisco airports, and more than a quarter of United’s nearly 1,800 daily flights originate in the state.
If United chooses to launch its new low-cost service in the West, it would be “a way to reinforce their two California hubs and to stem the tide of incursion by the low-cost carriers,” said Michael Allen, chief operating officer of the consulting firm Back Aviation Solutions.
But rolling out a new airline won’t be easy. United already faces tough negotiations with its unions and creditors to develop a bankruptcy reorganization plan that will hinge on massive cost-cutting. Creating a new airline within United will complicate the task, analysts said.
Several major airlines have tried over the years to fight Southwest with low-fare subsidiaries, with limited success. Now the effort has renewed urgency. Amid the weak economy and slump in travel, passengers are demanding cheaper fares that the major airlines can’t profitably match. They’re suffering massive losses as a result.
Delta Air Lines Inc., for instance, last month unveiled plans for its own low-cost “airline within an airline” that will concentrate on East Coast markets.
But Ron Kuhlmann, an analyst with Unisys R2A Consultants, questioned why United, Delta and others are limiting their lower-cost services to certain regions. “The solution needs to be companywide,” he said. “If you make money on one little chunk of business, but lose money everywhere else, you’re not solving the problem.”
The original “Shuttle by United” began in 1994 and had a mixed record until it was abandoned a month after the terrorist attacks in 2001, when United and nearly all airlines slashed their operations. At the time, the shuttle had 468 flights around the West. Although United kept serving many of the same cities as the shuttle, the shuttle’s brand was dropped and its frequency of flights was reduced.
United never broke out the shuttle’s performance figures. But the shuttle did get credit for boosting United’s passengers within California.
Meanwhile, United also dropped a $100 fee it planned to start charging next month for customers flying on standby. Several airlines announced similar fees in September, which angered many travelers. Analysts predicted other airlines would match United’s rollback.
*
Times wire services were used in compiling this report.
