UAL’s Low-Fare Ted Arrives in Crowded Market
Ted has landed in Southern California.
Sporting bright blue and orange wingtips and a determinedly cutesy persona, the newest low-fare carrier arrived Friday at Ontario International Airport. Ted will have four round trips daily between Ontario and Denver and will begin daily service between Los Angeles International Airport and Las Vegas on March 7.
Ted is UAL Corp.’s gambit to gain a toehold in the region’s lucrative low-fare air travel market dominated by Southwest Airlines Inc., JetBlue Airways Corp. and Alaska Air Group Inc.’s Alaska Airlines, among others. Operating under Chapter 11 bankruptcy protection for more than a year, the parent of United Airlines hopes to regain some of its footing with Ted.
At the very least, UAL hopes Ted makes an impression. In a bid to distinguish itself from its more staid older sibling, Ted -- the name is short for United -- entertains passengers with such features as “Tedtunes” and “Tedevision” and encourages them to buckle up because “Ted wants you to be safe.”
In one area, though, Ted will be joined at the hip with United: frequent-flier miles. Ted passengers will be able to accumulate United miles.
“Southern California is a very important market for us,” said Sean Donohue, a United vice president who is heading Ted. The carrier began flying this month to several destinations from its hub in Denver and between San Francisco and Las Vegas.
In the Southland’s competitive travel market, analysts don’t expect Ted to pose much of a threat to existing low-fare leaders, especially Southwest, the dominant airline in California.
“Ted doesn’t do anything new to shake up the other low-cost airlines in Southern California; it just gives consumers another option,” said Alan Sbarra, a consultant with Unisys R2A Transportation Management Consultants in Oakland. “As a consumer, you want as many airlines battling it out as you can.”
When service begins at LAX, the walk-up fare on Ted between Los Angeles and Las Vegas will be $208.70 round trip plus tax. A promotional round-trip fare purchased two weeks in advance is $86.70 plus tax, a spokesman said.
In comparison, at Southwest -- with 15 daily flights from LAX to Las Vegas -- the walk-up fare is $198.70 round trip plus tax, and it is $136 for a 21-day advance purchase, a spokeswoman said. Southwest doesn’t fly between Ontario and Denver.
“We believe we have competitive fares, the frequency and the history in Los Angeles,” Southwest spokeswoman Whitney Eichinger said. “We encourage competition.”
Some have likened Ted to UAL’s previous low-fare service, Shuttle by United, which the company permanently grounded as part of its massive cutbacks in the aftermath of Sept. 11.
United hopes Ted will avoid that fate because of its lower labor and maintenance costs and greater efficiencies -- strategies right out of Southwest’s playbook. Ted employs existing United workers, who agreed to substantial wage and benefit cuts last year to help UAL stay in operation, and keeps its all-Airbus 320 fleet in the air an average of 11 hours a day, about 20% longer than United’s jets. What’s more, Ted’s planes have only coach-class seats.
“We bring in more revenue per plane,” Donohue said. “As we carefully deploy Ted throughout the country, we know our costs will be competitive.”
Nonetheless, some analysts say Ted is nothing more than United with a new paint job, and question whether it can achieve the lower costs of a Southwest or JetBlue. Southwest’s average cost per seat per mile, a key industry cost measure, is 7 cents, compared with JetBlue’s 7.1 cents, Frontier Airline Inc.’s 7.8 cents and United’s 10.1 cents, Sbarra said. Figures for Ted were unavailable, but Sbarra didn’t believe they would be lower than Southwest’s.
Similar attempts by major carriers to enter the low-cost carrier market have had mixed results. Delta Air Lines Inc. last year launched Song as a low-fare option on the East Coast. This month, Delta said it would delay expansion plans pending a company review.
Still, most agree that Ted’s arrival is a plus for California travelers.
Ted provides “another option at a low cost,” said travelers’ advocate Kevin Mitchell. “That’s a good thing for consumers, whether Ted succeeds or fails.”
Elk Grove Township, Ill.-based UAL, which lost $252 million in January, expects to exit Chapter 11 Bankruptcy Court protection by June.
