United Airlines owner UAL may restrict the growth of its low-fares subsidiary, Ted, in an attempt to protect yields on its full-service operations.
UAL chairman, president and chief executive Glenn Tilton, speaking at September's European Aviation Club lunch in Brussels, said the group would not let 50-aircraft Ted's growth go unchecked, and that UAL, in bankruptcy protection since 2002, was looking for ways to maintain the market segmentation between Ted, mainline United Airlines and affiliates operating the United Express brand.
"We need to rein in Ted's growth - we launched it as a good market segmentation discipline to service a leisure-only market and not enter business routes and we want it to continue to fly its value proposition," says Tilton.
Ted has a fleet of 51 Airbus A320s operating from United's hubs at Chicago O'Hare, Denver, Washington Dulles, San Francisco and Los Angeles, flying to holiday destinations.
Tilton, who came to UAL from oil giant Texaco, says the group needs to bring marketing skills to the fore to ensure that two-class, high-yield routes between major metropolises are not eaten away by a desire to expand Ted.
"The airline industry is very insular, but its track record suggests that may not be a good thing, so we need to bring in fresh blood to look at ventures like Ted, which are essentially a consumer product," he says.
Tilton also put a year-end deadline on talks to define where an estimated $650 million in savings can be found. He says there may be a need for more job cuts on top of the 6,000 already being considered. "We have legacy costs that are no longer sustainable, including costs associated with labour and employee benefits, work rules and productivity issues," he says.
Tilton compared the United management to being trapped in a pressure cooker, saying the whole industry was short-termist, focusing on escaping the pressure rather than a long-term survival strategy.
"We must use our time in bankruptcy to restructure the company and be prepared to make the hard decisions to make this company viable," he said. "Our intent is to do this once and do it right."
JUSTIN WASTNAGE / BRUSSELS
Source: Flight International
