Stronger, leaner United may emerge with basic service intact
By Donna Rosato and Barbara Hansen
USA Today
After two horrible years, United Airlines is a much smaller company that makes almost a quarter fewer daily flights.
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But a more favorable comparison has drawn little notice: United still flies daily to 115 airports worldwide — almost as many places as it did at the end of 2000.
Breadth of service long has been United's strength. The airline hopes to maintain its far-flung network in the years after it emerges from bankruptcy.
That's an important clue to what a post-Chapter 11 United might look like as management prepares to present a business plan to the board of United's parent company, UAL.
The good news for fliers: Preserving a sprawling route network linking the United States with cities in every hemisphere is a top priority.
United's schedule cuts so far show how the carrier has managed to preserve some presence even in cities it no longer serves.
Thirteen domestic airports fell off United's route map in 2001 and 2002 — and five more this month — but all are now served by United Express carriers.
Travelers in those places still have direct service to United hubs, can call United to make reservations, and get United frequent-flier miles. Instead of flying big jets, they ride small jets and turboprops flown by independent carriers with lower operating costs than United.
"We believe that one of our greatest strengths is our route network. All of our hubs are strong cities with good local markets. We will continue to build off ... those and protect what we think will be our strongest asset going forward," says Greg Taylor, United's senior vice president of planning. "We think having a network that's deep and wide is very important to our customer base."
United says that if it can cut costs sufficiently, it will reorganize as a stronger, leaner airline, and fliers should see little change in the markets it serves.
United's ability to provide flights to dozens of destinations — not to mention frequent-flier awards to vacation spots around the world — is regarded as a prime asset. It's what distinguishes United from the low-cost, low-fare carriers pulling away United's domestic customers in city after city. Southwest, the largest discount carrier, for instance, doesn't fly to Hawai'i or any international points.
Reducing costs by winning concessions from labor unions and suppliers is only part of the proposed fix for United. Another part is changing where and how it flies people from one place to another.
If United survives, fliers can expect:
• More flights on regional jets.
Last month, the three United Express airlines — Atlantic Coast, SkyWest and Air Wisconsin — operated 128 regional jets. United wants the regional jet fleet to be 236 by early 2004, but it needs approval from its labor unions. United's unions long ago won limits on how much flying United's regional-airline partners could do, because they feared flights and jobs would migrate to the regionals, which tend to pay lower wages.
• More flights operated by United code-share partners instead of United.
Code-share agreements allow United to place its marketing code on flights operated by a partner airline so United can sell seats to more cities than it can afford to fly to with its fleet. United has powerfully exploited code-sharing through its Star Alliance partnership with such international carriers as Air Canada, Lufthansa and Singapore. It's considered the strongest international alliance among the major carriers.
• A new United low-cost airline serving vacation destinations.
This concept is still a work in progress. United officials say they want to develop a national low-cost carrier that could replace the traditional United Airlines service on certain routes dominated by discount carriers. The service might also fly to destinations not on United's route map today, such as Mexican resort areas.
Some industry experts are skeptical that creating a low-fare carrier makes sense for United.
"Their pronouncement that they will meet the low-cost carriers head-on is one of the more moronic ideas I have ever heard," says Adam Pilarski, senior vice president at Avitas, an aviation consulting firm.
United created Shuttle by United, a mostly West Coast operation, in the 1990s to fight the discounters but scrapped it after the Sept. 11 attacks.
United also needs to preserve a large route network to compete against carriers such as American and Delta, says United adviser Daniel Kasper, managing director at the consulting firm LECG. Like United, these carriers have large domestic and international operations. Unlike United, they're trying to fashion themselves into leaner competitors by cutting expenses outside the bankruptcy process.
Northwest Airlines, Continental Airlines and Delta Air Lines last week received conditional approval on a marketing alliance that would create a formidable domestic network, Kasper says.
Despite some high hurdles, Kasper says there's reason for optimism about United's fugure.
"They've got a valuable route network, particularly internationally, a strong brand name and a good fleet. They just have a completely unsustainable cost structure," he says.
