United to Launch Low-Fare Air Carrier
Thursday September 18, 2:34 am ET
By Cindy Brovsky, Associated Press Writer
United Airlines to Launch Low-Fare Carrier From Denver Next Year in Bid Out of Bankruptcy
DENVER (AP) -- United Airlines is launching a new low-fare carrier next year, betting that customers seeking low fares and few frills can help restore its finances and smooth its way out of bankruptcy.
The nation's second-largest airline said Wednesday it will base the new operation at its Denver hub in February, testing routes in the Southwest and Southeast before expanding service across the country.
The new airline, which has not been named, will initially fly to Reno, Nev., Las Vegas, Phoenix, Ontario, Calif., New Orleans and the Florida cities of Orlando and Tampa -- all destinations that attract mostly leisure travelers.
"Customers want low fares, low fares, low fares, and they're not willing to pay extra for a free meal," said Sean Donohue, vice president for the new operation.
Tickets will go on sale in November. United said the new airline will expand next year to 40 Airbus A320 jets, each seating 156 passengers.
Still, industry analysts were skeptical about how effectively a huge carrier like United would be able to compete on the competitive turf of discount rivals such as Frontier, AirTran, JetBlue and Southwest. All those airlines continue to grow, with Southwest and JetBlue remaining profitable even throughout the industry's prolonged downturn.
"So far, the track record for creating separate low-cost airlines has not been good at all," said analyst Philip Baggaley of Standard & Poor's Corp.
Earlier this year, United unions cleared the way for the venture by agreeing to less restrictive work rules as part of the company's restructuring. United hopes the yet-unnamed carrier will eventually handle as many as 30 percent of its now-1,500 daily flights.
While United's former shuttle service in California failed, Baggaley said the airline has little choice but to scout alternatives to answer the low-fare rivals.
The major hub airlines have adopted different strategies in response to the discounters' assault -- Delta Air Lines launched a low-fare unit earlier this year while American, America West and others have been experimenting with reduced last-minute fares.
Since filing for Chapter 11 last year, United has restructured its labor contracts -- saving $2.6 billion a year through 2008 -- and its airplane leases. The Elk Grove Village, Ill.-based airline is trying to end years of heavy losses.
A spokesman with Denver-based Frontier said the airline isn't worried about customers defecting to United.
"Frontier is flattered that United recognizes our low-cost model works," airline spokesman Joe Hodas said. "We've been successful at it for 10 years and the Denver market is demanding it. They have a tough battle on their hands if their intention is to hurt us."