United to boost overseas flights

No. 2 airline says it will reduce domestic service

Greater use of Dulles expected

October 07, 2004|By Meredith Cohn | Meredith Cohn,SUN STAFF

In a move that could bring more international flights to Washington Dulles International Airport, United Airlines said yesterday that it will step up flights to cities overseas and reduce domestic service as a part of its larger plan to reduce costs, raise revenue and emerge from bankruptcy.

United, the second-largest airline, has been in bankruptcy proceedings for almost two years. Observers had predicted it and other so-called legacy carriers with similar financial woes would begin cutting routes that increasingly are served by low-cost carriers such as Southwest Airlines and JetBlue Airways.

The low-fare carriers offer cheaper tickets across the country that the legacy carriers have matched, only to lose money because their operating costs are higher. Most of the low-fare carriers don't yet fly to international markets.

"This may be a natural consequence of changes in the industry as low-cost carriers demonstrate their pricing power on domestic routes," said Mark Gerchick, director of George Washington University's aviation graduate program and a consultant to the industry, including United.

"Major carriers will look toward international routes where they have the longest experience and expertise," Gerchick said.

For the three airports in the Baltimore-Washington area, there could be big changes in store, although United spokesman Jeff Green said he could not say where service will increase or decrease.

Some analysts said United's plan to shift some of its domestic flights to regional jets or propeller planes could mean changes to the kinds of flights offered at Baltimore-Washington International Airport. Those smaller planes often have 70 seats or fewer and offer little room for travelers to stretch their legs or stow carry-on luggage.

United offers 17 flights a day from BWI, which makes it the airport's third-largest carrier, behind low-cost carriers Southwest and AirTran.

United said it would move some of its domestic service to regional partners as well as to United Express, which serves smaller domestic markets, and Ted, the airline's low-cost offshoot. Neither operates at BWI.

"You could end up being flown on a 70-seat Chautauqua Airlines plane or Air Wisconsin or Mesa," said Robert Mann, president of R.W. Mann & Co. Inc. in Port Washington, N.Y. "That may not be acceptable to everyone, but that's what will be offered."

Other analysts and industry officials agree United is not likely to abandon BWI or Ronald Reagan Washington National Airport, where the airline offers 15 domestic flights a day.

Tom Sullivan, spokesman for the Metropolitan Washington Airports Authority, which operates Dulles and National, said there was some cachet to National, which is frequently used by dignitaries of the nation's capital.

European gateway

As for Dulles, Sullivan said, "We have not been notified of any specific schedule changes, but our sense is United will continue a strong international presence at Dulles Airport. We are United's largest East Coast European gateway and the fifth-largest European gateway of any airline."

On the domestic front, the airline offers 66 flights daily at Dulles. Ted offers 17 more flights, and United Express has 212 flights. Together they account for 42 percent of the daily domestic service at the suburban Washington airport.

At Dulles, United has faced intense competition from Independence Air, which was a commuter feeder airline for United and others until this year. The low-cost airline has forced United to match its cheap fares, despite United's higher costs to fly.

With international service, United accounts for about half the departures at Dulles. United offers 106 weekly departures and United Express offers an additional 49 flights a week.

Mann, the consultant, agreed that Dulles and the airline's four other hubs stand to gain international flights. Besides Dulles, United has hubs in Chicago, Denver, San Francisco and Los Angeles. United executives said those five airports will continue to be hubs.

But he said the strategy toward international flights and away from domestic service has some risks.

"Everyone has identified international markets as an opportunity," Mann said. "Once everyone rushes in there won't be so much opportunity. There will be excess capacity."

Eventually, the low-cost carriers will move into the international markets and challenge the major carriers' dominance - and higher ticket prices - he and others said. Already, the low-cost carriers serve destinations in the Caribbean and North America.

In all, Chicago-based United said, it will increase the number of seats on international flights 14 percent by March and decrease seats on domestic flights by 12 percent.

Cutting to compete

The airline, as well as other major airlines with the traditional hub-and-spoke models, is seeking substantial reductions in costs to compete with low-cost carriers that now account for more than a quarter of the industry's market share.

United is seeking $5 billion in annual cost savings through labor concessions and other operating changes, such as the flight shifts. The latest move will mean cuts to the airplane fleet and work force, the company said.

Other airlines are seeking labor concessions and some, such as American Airlines, also have announced moves to more profitable international routes.

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