LCC Code Name: "Star Fish"
 

Today's WSJ reports the UA LCC is planned to ultimately account for about ONE-THIRD of United's overall capacity and will offer no F cabins. News came from confidential briefings to stakeholders last week re: the new business strategy. LCC code name -- not necessarily the go-to-market name -- is "Star Fish."

The WSJ points out that UA is obligated to resume aircraft-lease payments Friday after a 60-day holiday but is generally free of ominous pronouncements/predictions.

Operation "Star-Fish", catchy name. I wonder where UAL is going to come up with the ca$h to start up this low cost airline;

Cash to buy the planes,
Cash to sign the leases
Cash to buy the operational EQP.
Cash to pay the people, it not like current UAL employes are going to jump at the chance to work for it, and UAL can't force people to work either.

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.

Sounds "fishy" to me.

http://www.flyertalk.com/forum/biggrin.gif Sorry, couldn't resist http://www.flyertalk.com/forum/biggrin.gif

I thought the plan was to move some existing A319/A320s from UA, thereby leaving those awesome 733s and 735s for mainline service. If they leave behind enough of the old junk maybe they can change the name to "UA Classic".

How about Chum instead, as all this LCC is going to do is hasten the sharks' arrival... http://www.flyertalk.com/forum/biggrin.gif

According to Reuters...

Sorry Charlie.

total network proposition? is that marketing gobbldeygook, or a signal that the "new" UA won't be (ahem!) a 'family' airline.

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.

Named because they expect everyone to work for scale. http://www.flyertalk.com/forum/wink.gif

Jacque,
Maybe they won't pay cash for the startup. Maybe they are taking a page out of a Frank Lorenzo BK and sell it for notes that will bring pennies on the dollar.

oops!! instead of sell maybe I should have said transfered.
But if it is going to be seperate company I guess they would have to put up cash for the prerating certificate, or maybe they could dust off the Capital Airways cert.

Appropriate, I suppose. Starfish are bottom-feeders after all.

I don't understand the objections to this restructuring. It seems reasonable that UA could reduce their pt/pt LCC routes to maybe 9 cents, no first, near the Southwest level, I'd pay extra for E+ over Southwest, and the short range hub flights down to maybe 13 cents, and the mainline transcontinental and international routes down to maybe 10 cents with lower labor costs. Then with higher business fares, a still outstanding route structure and perks and upgrades on the main line they could be profitable again. Much of my travel from SEA was along the left coast on the Shuttle. I hated it, but you can endure almost anything for an hour and a half, and it didn't seem to have much effect on overall loyalty.

Bruce

Are the UAX airlines losing money? As in *lots* of money?

Even with a higher CASM then United, I would think the UAX airlines must be making money, otherwise they would not still be in business, much less expanding.

If UAX could not justify a route, then UAX would not be flying it. US' affiliates have ended service to many cities in the Northeast because the passangers are not there, even for little planes like J-41s.

On the UAX flights I am on, unless it is really odd hours (first or last flight of the day), they are usually full or nearly full, so if this is a pattern, I imagine would be getting decent revenue from their load factors.

Or even at a 16 cent CASM, perhaps their revenue versus cost structure is such that they make at least 16+ cents per seat-mile flown.

I am not sure I think that point-to-point travel by UAX is a doable idea. The UAX airlines "prosper" because they offer service from small markets *to* the hubs, where folks can then hook up with mainline flights to larger destinations. Instead of, say, having to drive from Fresno to SFO to catch a plane to NRT, they can now fly to SFO and then on to NRT.

But how many people want to fly between, say, Fresno and Medford, OR? Routing all the Fresno and Medford passangers (whatever their final destination would be) through SFO seem to be able to justify offering service to both of those cities for the handful of folks who do want to travel between Fresno and Medford.

US Air is trying to form a "regional jet airline" for service around their Northeast core. It appears "Star Fish" might be the same for UA from their Midwest (ORD) core - a "Midwest Shuttle".

Instead of trying to compete again on the West Coast with a "Shuttle II" - an area where AS and WN have a hard presence - they seem to want to try replace much of the mainline service to and from ORD with smaller planes. Looking at WN's schedule, it appears their destinations in the midwest are much more limited than what US/UA offer.



[This message has been edited by SEA_Tigger (edited 02-04-2003).]