Despite cutbacks, United preserves route network By Donna Rosato and Barbara Hansen, USA TODAY After two horrible years, United Airlines is a much smaller company that=20 makes almost a quarter fewer daily flights. But a more favorable comparison= =20 has drawn little notice: United still flies daily to 115 airports worldwide= =20 =97 almost as many places as it did at the end of 2000. That's an important= =20 clue to what a post-Chapter 11 United might look like as management=20 prepares to present a business plan to the board of United's parent=20 company, UAL. The good news for fliers: Preserving a sprawling route=20 network linking the USA with cities in every hemisphere is a top priority.= =20 United's schedule cuts so far show how the carrier has managed to preserve= =20 some presence even in cities it no longer serves. Thirteen domestic=20 airports fell off United's route map in 2001 and 2002 =97 and five more this= =20 month =97 but all are now served by United Express carriers. Travelers in=20 those places still have direct service to United hubs, they still can call= =20 United to make reservations, and they still get United frequent-flier=20 miles. Instead of flying big jets, they ride small jets and turboprops=20 flown by independent carriers with lower operating costs than United. "We believe that one of our greatest strengths is our route network. All of= =20 our hubs are strong cities with good local markets. We will continue to=20 build off of those and protect what we think will be our strongest asset=20 going forward," says Greg Taylor, United's senior vice president of=20 planning. "We think having a network that's deep and wide is very important= =20 to our customer base." United says if it can cut costs sufficiently, it will reorganize as a=20 stronger, leaner airline, and fliers should see little change in the=20 markets United serves. United's ability to provide flights to dozens of=20 destinations =97 not to mention frequent-flier awards to vacation spots=20 around the world =97 is regarded as a prime asset. It's what distinguishes= =20 United from the low-cost, low-fare carriers pulling away United's domestic= =20 customers in city after city. Southwest, the largest discount carrier, for= =20 instance, doesn't fly to Hawaii or any international points. United served= =20 more than 13,000 city pairs in 2001, 10 times what Southwest had. Reducing costs by winning concessions from labor unions and suppliers is=20 only part of the proposed fix for United. Another part is changing where=20 and how it flies people from one place to another. If United survives, fliers can expect: =B7 More flights on regional jets. Last month, the three United= Express=20 airlines =97 Atlantic Coast, SkyWest and Air Wisconsin =97 operated 128=20 regional jets. United wants the regional jet fleet to be 236 by early 2004,= =20 but it needs approval from its labor unions. United's unions long ago won=20 limits on how much flying United's regional-airline partners could do,=20 because they feared flights and jobs would migrate to the regionals, which= =20 tend to pay lower wages. =B7 More flights operated by United code-share partners instead of=20 United. Code-share agreements allow United to place its marketing code on=20 flights operated by a partner airline so United can sell seats to more=20 cities than it can afford to fly to with its fleet. United has powerfully=20 exploited code-sharing through its Star Alliance partnership with such=20 international carriers as Air Canada, Lufthansa and Singapore. It's=20 considered the strongest international alliance among the major=20 carriers. This month, United launched a code-sharing agreement with US=20 Airways on selected routes that United estimates will add $200 million a=20 year in revenue. The agreement gives United fliers increased service to 14= =20 cities in the East, along with United frequent-flier miles on US Airways=20 flights. =B7 A new United low-cost airline that will serve vacation=20 destinations. This concept is still a work in progress. United officials=20 say they want to develop a national low-cost carrier that could replace the= =20 traditional United Airlines service on certain routes dominated by discount= =20 carriers. The service might also fly to destinations not on United's route= =20 map today, such as Mexican resort destinations. Some industry experts are= =20 skeptical that creating a low-fare carrier makes sense for United. "Their= =20 pronouncement that they will meet the low-cost carriers head-on is one of=20 the more moronic ideas I have ever heard," says Adam Pilarski, senior vice= =20 president at Avitas, an aviation consulting firm. United created Shuttle by= =20 United, a mostly West Coast operation, in the 1990s to fight the=20 discounters but scrapped it after the Sept. 11 attacks. United also needs=20 to preserve a large route network to compete against carriers such as=20 American and Delta, says United adviser Daniel Kasper, managing director at= =20 economic consulting firm LECG. Like United, they also have large domestic=20 and international operations. Unlike United, they're trying to fashion=20 themselves into leaner competitors by cutting billions of dollars in=20 expenses outside the bankruptcy process. Northwest Airlines, Continental=20 Airlines and Delta Air Lines are awaiting approval on a domestic marketing= =20 alliance that would create a formidable domestic network, Kasper says.=20 Despite some high hurdles, Kasper says there's reason for optimism. "I=20 think they've got a very good chance to succeed here. They've got a=20 valuable route network, particularly internationally, a strong brand name=20 and a good fleet. They just have a completely unsustainable cost=20 structure," he says. United's schedule changes have drawn little attention,= =20 but trends emerge from a USA TODAY analysis, using data from Back Aviation= =20 Solutions and OAG: =B7 Domestic flights have taken the biggest hit. United's domestic=20 flights, the bulk of its operations, were down 22% in December compared=20 with December 2000. U.S.-international flights fell only 14%. "We try to=20 match capacity to demand, and after 9/11, we saw more fallout in domestic=20 travel than international," Taylor says. =B7 West Coast hubs suffered the biggest cuts among United's five U.S.= =20 hubs. The number of flights out of Los Angeles and San Francisco=20 international airports fell 40% and 26%, respectively, from December 2000.= =20 Washington Dulles was down 24%; Denver, 19%; and Chicago O'Hare, 9%. =B7 United is retreating from competitors' hubs. United has cut back= on=20 flights between its hubs and airports where rivals have a big advantage.=20 For example, United used to fly non-stop seven times a day from Los Angeles= =20 to Phoenix, where America West and Southwest have 68% of passengers. Today,= =20 it has no non-stop flights between Los Angeles and Phoenix; United Express= =20 flies the route. United has also eliminated non-stops between Los Angeles=20 and Delta's hub in Atlanta and Continental's hub in Houston. =B7 United has dropped some smaller international destinations that it= =20 says are unprofitable. Earlier this month, United closed operations in=20 Caracas, Venezuela; Santiago, Chile; and Dusseldorf, Germany. On Jan. 22,=20 it will end service to Milan, Italy, and in March, it will stop flying=20 between the USA and New Zealand. But it plans to resume non-stop flights=20 between the USA and Seoul, South Korea, in February. United says there=20 will be few other international cutbacks, which airline analysts applaud.=20 "While there may be some opportunities to replace flights to Europe through= =20 international partners, I would be very disappointed to see United do=20 significant route sales internationally," says Jamie Baker, airline analyst= =20 at J.P. Morgan. United's determination to keep its route system intact shows it's trying=20 not to repeat the failed survival strategy of past troubled carriers such=20 as Pan Am. That storied airline kept itself alive through the 1980s by=20 raising hundreds of millions of dollars from piecemeal sales of valuable=20 chunks of its route network. But the sales provided only temporary relief,= =20 while making its competitors stronger and leaving Pan Am weaker. Pan Am's=20 difficulties forced it to sell its trans-Pacific, its U.S.-London Heathrow= =20 and Latin American routes to raise cash. The buyer each time? 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