Thursday, September 18, 2003
United sets stage for
low-fare war
By Chris Woodyard
USA TODAY
Taking aim at
discounter Frontier Airlines, United Airlines announced Wednesday that its new
low-fare subsidiary will start in Denver, grow to 40 jets by the end of next
year and initially fly to seven primarily leisure destinations.
The
unnamed low-fare carrier is considered a key part of United's attempt to
resurrect itself in a bankruptcy reorganization. While the low-fare operation
will start in February in Denver, officials say the discount flights will expand
to other United hubs.
United's low-fare operation will borrow cost-saving
ideas employed by successful discount carriers such as Southwest. They include a
common fleet type — 156-seat Airbus A-320s in United's case — and a simplified
fare structure. The plane will be all coach except for a few rows with extra
legroom. All seats will be pre-assigned, and food and beverages will be
available. The airline will strive to prepare planes between flights faster than
United does.
Officials say there are enough cost
savings to avoid a repeat of Shuttle by United, the airline's failed attempt at
a low-cost subsidiary in the 1990s. "We have a cost target that we were never
able to come close to achieving with the shuttle," says Sean Donohue, the vice
president in charge of the operation.
Controlling costs could be an
issue. There are no plans to pay flight crew members and other employees a lower
wage. Some observers are skeptical. "This is Shuttle Phase II, and I think it
will be confusing to the customer," says aviation consultant Michael Boyd. "It's
doing the same thing."
There are also fears that the new unit could
divert management's attention at a critical time for the airline. "If you're
going to fix the factory, fix the factory. Don't fix the outhouse out back,"
says another aviation consultant, Robert Mann.
United's move could
challenge Frontier, which has successfully undercut United's fares at the Denver
airport for years. United's discount operation will start by flying from Denver
to Las Vegas, Reno, Phoenix, New Orleans, Tampa, Orlando and Ontario, Calif. All
are destinations presently served by Frontier or its commuter airline operation.
Yet only Las Vegas and Phoenix are among United's top non-stop destinations out
of Denver, according to Eclat Consulting.
Frontier spokesman Joe Hodas
called United's plans for Denver "the sincerest form of flattery." Frontier
shares fell 2.4% Wednesday, down 41 cents to $17.02.
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