<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Jacque:
UAL already has a low cost carrier it's called United Express. UAL had a deal that would have allow the UAX carrier to double thier RJ fleet OVERNIGHT, the fact the UAL isn't exporing this route should be proof enough that the people running the company aren't serious about pulling out of this BK.</font>
Jacque,
UAX is not a LCC, anymore than Comair/ASA/Skywest represent one for Delta. They pay their employees less for sure, but their CASM's bear out a different story. Their CASM is in the neighoorhod of 16 cents versus about 11.35 for mainline UA, and about 7 cents for Southwest. UAX represents a way for United to keep it's name in nearly all the same markets they were in before and minimize losses in a bad environment. Keeping their name in all of the same markets preserves the network and is an attempt to buck the 'shrink to profit' theory. The losses are stemmed by taking advantage of unit costs. UA and DAL for example, both claim that between 85-90% of their routes are currently unprofitibale. So if you know that a route is going to be money losing, but need it to keep it for network reasons, you might as well lose less total $$$ with a SJ than with a 737/A320.
Obviously, this is a short term manuever to stem cash, which is why you see immense pressure being placed on UAX carriers to drop their costs about 20% and possibly assume some more of the risk of providing their services. Twenty percent cost cuts, still only bring their costs down to around the 13 cent per mile range and the larger SJ's might drop that another cent or so. IOW, their is little likelihood that these aircraft will ever form a LCC at UA or anywhere else. I think what UA's plan may be is to reduce capacity(not flights) at the hubs using smaller 70 and 90 seat SJ's instead of 737 and Airbus', which will be moved to the point to point LCC system in part or whole. The idea being to route the lower(relatively) fare customer around the hubs as much as possible, to allow them to raise the fares longer term for those who the hub was initially designed for: the higher revenue business pax. At the end of the day it's still a business, and if anyone truly believes that the fares for all carriers will not be raised over time they will be in for a surprise. It will likely never approach the levels of the late nineties, and probably be done in a more gradual and subtle way, but it will occur. Revenue stinks for everyone, even the LCC's.