Den Lcc Announcement Imminent

[UnitedChicago]

Obviously I'm just kidding.

Seriously folks, I don't mean to be exclusionary - but I just got fed-up with you-know-who continually initiating negative threads and repeating the same thing over and over and over and over. It's evident to me and many others that this person has an axe to grind at UA - so don't tell me that this person is posting strictly to engage in a discussion. It's obvious to me that his posts are meant to inflame. However - like i've said before - the best thing to do is ignore posters you feel are flaming.

NOW...back on topic...just got this. I'm looking forward to the details...

UC

--

UAL may tip hand on new airline
Expected announcement of low-cost carrier puts an emphasis on Denver

By David Kesmodel, Rocky Mountain News
September 17, 2003

United Airlines is expected to announce details of its new discount airline today at Denver International Airport, including plans for the operation to debut at DIA, sources said.

United, flying under bankruptcy protection, is expected to announce that the operation will fly Airbus A320 jets. United also is expected to release details on routes and a target date for the new airline's launch, but won't announce the brand name, sources said.

DIA, United's No. 2 hub, will be a key market.

The emphasis on Denver is a sign that one of the low-cost operation's primary goals will be to wrest customers from Denver-based Frontier, a fast-growing rival.

UAL Corp.'s United said in a media alert Tuesday that Pete McDonald, executive vice president of operations, would make an announcement at DIA at 11 a.m. today. But the carrier didn't disclose the topic, and spokespeople refused to comment.

DIA's dominant airline has said the new operation, internally called Starfish, will launch in the first quarter of next year and deploy about 40 narrow- body jets in popular leisure markets.

No matter what Chicago-based United announces today, the unit still will have to pass the scrutiny of United's official creditors committee, which will be evaluating United's overall reorganization plan before it exits Chapter 11.

Early in United's bankruptcy, Chief Executive Officer Glenn Tilton made the budget airline a major component of his plans for reinventing United and fighting growing competition from discounters such as Southwest. He planned to expand the operation to 134 jets by 2008 and said Denver travelers could be among the unit's biggest beneficiaries.

Tilton drastically scaled back the strategy, however, when negotiations with unions failed to yield a separate pay scale for workers at the unit, reducing its potential cost-efficiency. Initially, United wanted the operation to be a separate company with separate management.

From the start, the proposed airline was blasted by industry analysts. They cite the fact that past attempts by large carriers, including United, have failed and say United should focus on its main business.

Earlier this year, Delta Air Lines Inc. launched its latest foray into the discount market, known as Song.

Sean Donohue, formerly based in Denver as a top United sales executive, is the vice president of its discount operation. His team has been analyzing routes, services and finances.

The unit is expected to compete in markets such as Las Vegas. According to terms of United's pilots' contract, the operation must fly Airbus A320 or A319 jets or Boeing 737-300 or 737-500 planes.

United's initial plans for a low-cost operation called for it to fly from Denver to markets such as Seattle, Las Vegas and St. Louis.

United, which filed the industry's biggest bankruptcy last December, previously had a low-cost carrier, known as Shuttle by United. But it shut the operation after the 2001 terrorist attacks.

Frontier, DIA's No. 2 carrier, said late Tuesday that it is ready for United's latest venture.

"We're going to keep doing business the way we've been doing business, and we think we have the appropriate cost structure in place to be successful," Frontier spokesman Joe Hodas said.

"Will United be able to shed themselves of the baggage that brought them into bankruptcy to run a successful low-cost carrier? That's the big outstanding question."

 

[UnitedChicago]

More info...

Will there be first class or all coach??

--

United’s New Low Cost Operation to Launch from Denver in February 2004

September 17, 2003

Simplified Fare Structure, Low-Cost Business And Leisure Fare Options To Be Added To United's Portfolio Of Products

Denver, September 17, 2003 - United Airlines (OTCBB: UALAQ.OB) today announced that Denver will be the launch hub for United's new low-cost operation (LCO), an essential element within United's portfolio of products. The LCO will serve predominantly leisure markets and feature a simplified fare structure with low-cost business and leisure fare options. The LCO will launch from Denver International Airport in February 2004.

"The United low cost operation and its attractiveness to leisure and business travelers perfectly complement our mainline and United Express operations, and those of our Star Alliance partners," said Sean Donohue, vice president for the LCO. "We've made significant reductions in our cost structure this year, allowing our low cost operation to be competitive, profitable and sustainable. The LCO is operated entirely by United employees and part of the strong brand and portfolio of products that our customers expect us to provide."

Tickets will go on sale in November through all existing sales channels - united.com, United Reservations, travel agents, and on-line reservation systems - and, later, via sales channels unique to the LCO. The LCO will be a United-branded product. The LCO name will be announced later this year.

The LCO fleet will launch with 4 Airbus 320 aircraft in Denver, and expand to 40 A320s by the end of 2004, 19 of which will be based in Denver. Each plane will have 156 seats, including a section of Economy Plus seats with extra legroom. From Denver, the LCO will fly to Reno, Las Vegas, Phoenix, New Orleans, Tampa, Ontario, Calif., and Orlando. Additional destinations will be announced at a later date.

All seats will be pre-assigned, and food and beverage service will be available on board. United customers will earn Mileage Plus miles on the LCO, and United's suite of Easy products, including EasyCheck-in and EasyUpdate, will be available to LCO customers.

The LCO will complement United's mainline and United Express service from Denver, the company's second-largest hub, and will be fully integrated into the United and United Express network. LCO customers will enjoy seamless connections to United, United Express and Star Alliance flights, including baggage check-through.

"This really underscores our long-term commitment to Denver, to Denver International Airport, and to our United and United Express employees in this community," said Pete McDonald, executive vice president - operations. "It also signals our intent to offer consumers more choice, more flights, more destinations, and simplified, lower fares on the LCO routes."

 

[winedndined]

This is great news! Hopefully they will announce the name and other details soon.
Lots of luck to all UAL employees in this new venture.

 

[UnitedChicago]

I vote for "U2". That was a name considered when they launched Shuttle. Seems like DEN is the logical choice to launch the product.

 

[ualflynhi]

United today announced that Denver International Airport will serve as
the launch hub for its new low-cost operation (LCO), an essential
element within United's portfolio of products. The LCO will serve
predominantly leisure markets and feature a simplified fare structure with
low-cost business and leisure fare options. The LCO will launch in February
2004.

"The United low-cost operation and its attractiveness to leisure and
business travelers perfectly complement our mainline and United Express
operations, and those of our Star Alliance partners," says Sean Donohue,
vice president-Low Cost Operation. "We've made significant reductions
in our cost structure this year, allowing our low-cost operation to be
competitive, profitable and sustainable. The LCO will be operated
entirely by United employees and part of the strong brand and portfolio of
products that our customers expect us to provide."

Tickets will go on sale in November through all existing sales
channels, including united.com, United Reservations, travel agents and on-line
reservation systems, and later via sales channels unique to the LCO.
The LCO branding, such as name and livery, will be unveiled later this
year; the LCO will be a United-branded product.

The LCO fleet will launch with four Airbus A320 aircraft in Denver,
expanding to approximately 40 A320s by the end of 2004, 19 of which will
be based in Denver. Each plane will be configured with 156 seats,
including Economy Plus® seats with extra legroom. From Denver, the LCO
will fly to Reno, Las Vegas, Phoenix, New Orleans, Tampa, Los Angeles
(Ontario), and Orlando. Additional destinations will be announced at a
later date.

All seats will be pre-assigned, and food and beverage service will be
available on board. United customers will earn Mileage Plus® miles on
the LCO, and United's suite of Easy products, including
EasyCheck-in(sm) and EasyUpdate(sm), will be available to LCO customers.

The LCO will complement United's mainline and United Express service
from Denver, the company's second-largest hub, and will be fully
integrated into the United and United Express network. LCO customers will
enjoy seamless connections to United, United Express and Star Alliance
flights, including baggage check-through.

"The LCO really underscores our long-term commitment to Denver, to
Denver International Airport, and to our United and United Express
employees in this community," says Pete McDonald, executive vice
president-Operations. "It also signals our intent to offer consumers more choice,
more flights, more destinations, and simplified, lower fares on the LCO
routes."
----------------------------------------------------
Q and A
----------------------------------------------------
Q. How will United's LCO be different from other low-cost carriers?

A. United's LCO will be the only low-cost carrier that benefits from
mainline connectivity -- not just cheaper point-to-point flights.
Passengers will have seamless access to United's unparalleled global route
network, United's suite of high-tech check-in and customer information
offerings, including EasyCheck-in and EasyUpdate, as well as membership
in United's Mileage Plus program, one of the highest-rated frequent
flyer programs worldwide. United's LCO also will offer assigned seating
and the Economy Plus section.

Q. Are LCO employees also United employees? Do they have different
contracts from mainline employees? What are the terms?

A. Absolutely. Represented LCO employees are United employees, and
they have the same contracts as United employees.

Q. How will this operation be different from United Shuttle?

A. We now have significant, long-term cost reductions that allow our
LCO to be competitive, profitable and sustainable over the long term.

Q. Will the LCO drain customers from existing mainline flying?

A. The LCO will allow the company to provide distinct service in select
leisure markets, supplementing our mainline flying. The LCO will add
seats and frequencies in these markets, providing maximum value for its
existing customer base and attracting new customers who might not have
considered flying mainline United. The LCO will have its own route
network, but there will be some routes served by both mainline and
United's low-cost carrier.

Q. Do you plan on adding other destinations in the future?

A. Absolutely.

Q. Will Denver be the LCO's only hub?

A. No, the company will announce other hubs at a later date.

Q. Why is this plan different from the plan you originally announced
for the LCO earlier in the year?

A. We were able to obtain significant cost reductions during our
collective bargaining negotiations that precluded the need for separate
agreements for the LCO. Coupled with other cost reductions, we now have a
cost structure that makes us competitive with low-cost carriers across
the board. The LCO offers a more competitive economic model in specific
leisure markets, and we'll offer LCO flying in those markets. United's
goal in the restructuring of our business model was to create an
airline that is competitive across all market segments, and we believe we are
succeeding.

Q. Have you determined a marketing budget for the LCO? How can you
afford to launch a new product when you're still in Chapter 11 bankruptcy?

A. United will make appropriate investments in advertising and other
marketing efforts to ensure the success of United's LCO. The exact
timing and financial details of the campaign are proprietary information
that would be inappropriate to disclose at this time. The low-cost
airfare market cannot be ignored in today's highly competitive airline
industry, and an entry into this arena has always been part of United's plans
for restructuring our business. We have a formula for a successful
entry into this market, and we believe our incremental ramp-up of the LCO
is a logical and responsible approach to entering the LCO market
successfully.
----------------------------------------------------
More Q and A Available
----------------------------------------------------
Additional questions and answers are available on SkyNet. Under Quick
Hits, click on Plan for Transformation.

 

[funguy2]

I don't mean to "flame" doesn't seem like much of a plan...

Pro: 156 pax A320's definitely means no First Class... But it also means an additional flight attendant (1 for every 50 pax minimum, unless UA uses more than the minimum anyway, I haven't noticed). So more seats means UA may get the benefit of lower CASM on these flights. However, lower CASM doesn't help unless the additional seats are filled... lower CASM means the flight could be profitable with lower RASM and higher load factors, offering the ability to lower prices or the average fare.

Con: UA will be retrofitting the interior, and potentially repainting the exterior of a number of A320's. Meanwhile, I assume they will be converting at least some of the former Shuttle B737's back to a two class configuration. So this does not seem very "low-cost" to me.

Con: UA labor contracts for the LCO are the same as other UA employees... In fact UA's across the board labor savings should help UA across the board, not just the LCO (as stated in the Q&A). This seems to be a better argument for why not to have an LCO (because the benefits are system-wide).

Possible Con: UA has not mentioned any on-board ammenities... Meanwhile, Frontier is all coach and has LiveTV. What will UA do to compete with this. Does UA actually become an inferior product?

Possible Con: Segmentation. It is conceivable that UA might operate UA normal, UA LCO, and UA Express all on one route. There is potential for customers to book away just because you never know what you're going to get... And of course, weather and/or mechanicals will make this worse. When you buy on Frontier or Southwest you get the same thing all the time.

Possible Con: If a passenger is travelling SAN to LGA... And he books on the LCO via DEN, is that going to have a lower fare than on normal UA through ORD? If the fares are close, will people book away from the LCO for the possibility to upgrade, inflight entertainment, etc. I think they might.

Like I said, I am not trying to flame, but I just don't see that much of a benefit... to the company nor to the passenger.

 

[UnitedChicago]

Funguy:

You're not flaming at all. You replied with your opinions in a respectful manner...and that's what this board should be about.



Thanks for your respectful views.

 

[767jetz]

Like I said, I am not trying to flame, but I just don't see that much of a benefit... to the company nor to the passenger.

To address some of your concerns, let me point out a few more differences.

The LCO will have an Economy Plus section. While this is not a business class, it is very popular with business travelers. If you've never flown in "EP" I can tell you that the extra room makes a huge difference in comfort. And it's not available on the competition being targeted by the LCO.

The 737's for now, will not be reconfigured. So that cost does not exist. Aircraft painting and reconfiguration will mostly take place during scheduled maintanence cycles, where interiors are removed and paint jobs are re-done anyway. Plus Airbus is giving UA a sweetheart deal on conversions. (Don't be surprised to see Airbus as a big player in UA's exit strategy.) Bottom line is that the cost will be minimal.

Your assesment of UA's lower cost being an advantage throughout the system is correct, and is why the LCO is only planned at 40 aircraft instead of 140. While labor contracts are basically the same on narrow body equipment, there will be other cost savings for the LCO. Specifically AC utilization, which at companies like Jet Blue, SWA, and Delta's Song(& dance ) decreases CASM significantly. While there may be some overlap of UA products in some markets, the LCO will be primarily targeting specific leisure markets. UA can also use it's connectivity to increase system revenue... an option not available to the competition.

I don't believe people will book away from UA do to confusion. The LCO is specifically designed to simplify the fare structure, and I think you'll find that they went to great lengths not to confuse customers.

Finally, as for on board ammenities, UA has said that food service will be provided. (SWA and JBlu have no catering) I don't know any details about Live TV. I do know that UA will be introducing inflight internet access throughout the system, and I'm sure that entertainment will be competitive.

Add to all of this the other benefits such as Easy Check-in, Advanced seat assginment, a leading frequent flyer program, and access to the worlds best route system, and I believe most customers will find our LCO to be a far superior product than the competition.

 

[Busdrvr]

In case it wasn't clear...
The LCC will have LOWER CASM than FRNT, with a much better FF program, more leg room and a better "hub and spoke" revenue premium. I give FRNT two to three years.

As far as devaluation of the brand, or the threat of getting "stuck" on the LCC, the ONLY people who should be getting less service on the LCC vs Mainline are the FC passengers. Business pax will still get econ plus on the relatively short flights

 

[N230UA]

Great replies iflyjetz and Busdrvr.

A couple more things:

- Additional cost savings will come from serving lower cost airports: airports such as ONT (which issued a press release today saying it would "ensure UA's LCO success") and RNO

- I think the estimate of 156 seats is to throw off the competition... eliminate 6 seats and you will be able to staff 1 less flight attendant.

- My opinions: United should use the "U2" name and use some U2 songs in the marketing roll out (elevation, beautiful day)... United 2.0 would be awesome too

 

[Bizman]

Business pax will still get econ plus on the relatively short flights

DEN to MCO and TPA are not "relatively short flights". Good luck to UAL, but I will be booking my trips out of ONT on other airlines.

 

[gatemech]

Con: UA will be retrofitting the interior, and potentially repainting the exterior of a number of A320's. Meanwhile, I assume they will be converting at least some of the former Shuttle B737's back to a two class configuration. So this does not seem very "low-cost" to me.

The 737's were never 1 class. They always had 8 first class seats. The galleys were changed. For short flights that isn't a problem.

 

[767jetz]

DEN to MCO and TPA are not "relatively short flights". Good luck to UAL, but I will be booking my trips out of ONT on other airlines.

Actually they are. At least by United standards. Long flights would be considered trans-con or longer. Ask anyone who flies JetBlu on a coast to coast flight. MCO and TPA are about 3 hours, not 5.

Sorry to hear you won't allow yourself to experience United's superior product. But thanks for the good wishes anyway.

 

[UnitedChicago]

One thing to always keep in mind is the value of retained customer: additional ff miles = increased loyalty.

That is value ($$) in the long term.

 

[Cfm56]

>>>>Finally, as for on board ammenities, UA has said that food service will be provided. (SWA and JBlu have no catering) I don't know any details about Live TV. I do know that UA will be introducing inflight internet access throughout the system, and I'm sure that entertainment will be competitive.

Add to all of this the other benefits such as Easy Check-in, Advanced seat assginment, a leading frequent flyer program, and access to the worlds best route system, and I believe most customers will find our LCO to be a far superior product than the competition. <<<


Sounds like a repeat of the stuff that was said when United Shuttle, CAL-LITE, and METRO-JET were started. "Overall our product is superior, assigned seating, 'wordwide service', food, blah, blah, blah.

The average guy doesn't care about "the world's best route sytem" and FF program...he wants consistent service from friendly people at low fares. I know many business people who have sworn off UAL for the rest of their lives due to the "Summer of Discontent" and UAL is still paying for it. "Wordwide service" and other egotistical rantings etc doesn't make up for the fundamental basics of friendly CONSISTENT service and not ripping off the last minute business traveler with fares 10 times higher than the leisure traveler. Others will be irritated at the product differentation with one 800 mile route on the UAL "mainline" always being 5 times more expensive than the same distance traveled on a UAL "Starfish" route instead of the same ticket cost per mile, or a cost consistency for the whole airline....no reputation for consistent low fares overall -- just on "some" routes. Meanwhile the other UAL 'mainline' routes will gradually be invaded by more LCCs anyway.

Oh.......and for the UAL and USAirways pilots who always lectured me on the "guaranteed, "safe" pensions" at their airlines, now you understand what I meant when I said I prefered to have a DC plan run by the union OUTSIDE of the airline's control or ownership.