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United to Launch a Low-Cost Carrier

September 18, 2003|From Times Wire Services

United Airlines said Wednesday that it would launch a low-cost carrier in February, flying from Denver to seven cities in the West and South, including Ontario International Airport.

The operation, as yet unnamed, will serve six other predominantly leisure markets: Reno; Las Vegas; Phoenix; New Orleans; Tampa, Fla.; and Orlando, Fla.

The goal of the No. 2 airline, whose parent UAL Corp. filed for Bankruptcy Court protection in December, is to compete better with discount carriers such as Frontier Airlines Inc., JetBlue Airways Corp. and Southwest Airlines Inc., which have grown quickly amid the economic downturn.

"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.

The new low-cost operation will replace current United flights to the seven destinations.

United is the dominant carrier at Denver International Airport. Denver is United's second-largest hub.

Tickets for flights on the new carrier will go on sale in November, United said.

Since filing for Chapter 11 in 2002 after years of heavy losses, UAL, based in Elk Grove Village, Ill., has restructured its labor contracts -- saving $2.6 billion a year through 2008 -- and its airplane leases.

The new airline will begin with four Airbus 320 aircraft, but plans to expand to 40 A320s by the end of 2004. The operation will be staffed by current employees of United.

The move is widely seen as a shot across the bow of Frontier, which is based in Denver.

Frontier spokesman Joe Hodas said a big airline like United may have difficulty initiating a low-cost operation.

United is "so large that we definitely have to take note, but by the same token, they are so large, can they successfully do this venture? I don't know the answer," Hodas said.

UAL shares fell 5 cents to $1.03 on the OTC Bulletin Board.

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