United bullish on discount carrier

By Dave Carpenter
Associated Press

CHICAGO — United Airlines said yesterday it plans to return to profitability through a combination of reducing costs, launching a low-cost carrier and using more regional jets.

In the most extensive comments yet on its new strategy in bankruptcy, United told its employees that it needs its own discount carrier to become more competitive in the leisure travel market.

It defended the plan to create a separate, low-cost airline — which has been assailed by unions and questioned by industry experts since it was first disclosed in December — saying it will entail a new business model that "has learned from the industry's past mistakes."

But unions remained cool to the plan, and analysts said there were not enough details available yet to fairly assess it.

United said its plan is centered on the strong network of routes and hubs that give it a "distinct revenue advantage" over its rivals.

"We simply generate more money with our network," executive vice president Doug Hacker said in a taped message on a companywide hot line. "What we don't have are cost advantage and the flexibility that allow us to respond to substantial changes in the market."

United, the world's No. 2 carrier, filed for Chapter 11 bankruptcy protection eight weeks ago and lost a worst-ever $3.2 billion in 2002.

The airline has been scrambling to overhaul its financial strategy, slash labor costs by a targeted $2.4 billion a year and restructure its fleet.

It said in a monthly operating report filed with the federal bankruptcy court in Chicago this week that it lost an average $7.2 million a day during its first 23 days in bankruptcy.

Shares in United parent UAL Corp. jumped 19 cents to close at $1.10 on the New York Stock Exchange.