United wants to shift 30% of U.S. capacity to new discount carrier

Thursday, February 13th 2003, 12:00 am

By: News On 6

CHICAGO (AP) _ United Airlines intends to shift about 30 percent of its U.S. capacity into a proposed discount airline as part of its effort to emerge from bankruptcy, a spokesman said Thursday.

Plans for a low-cost carrier were disclosed in December after United filed for Chapter 11 bankruptcy protection, but remain in the formative stage.

Delta Air Lines plans to launch a discount airline _ named Song _ in April, and American Airlines said Wednesday it was considering one.

Major carriers have been reporting record losses, in part due to increased competition from low-cost airlines such as Southwest. United says it competes with discount carriers on about 70 percent of its routes.

``The key is to be cost-competitive and have our costs at the right level so it (a low-cost carrier) can succeed and flourish over a long period of time,'' company spokesman Joe Hopkins said.

United's unions, however, have resisted the plan and are concerned about the impact on jobs and seniority. ``The more we hear of the company's proposal for a low-cost carrier, the less we like what we hear,'' pilots' union spokesman Dave Kelly said Thursday.

CEO Glenn Tilton told employees on a company hot line Wednesday that the low-cost carrier will benefit all elements of United.

``The low-cost carrier, the new product, will provide another avenue for growth to United pilots, flight attendants and other employees,'' he said. ``It is a critically important part of our plan to rebuild our company.''

Besides starting a low-cost carrier, United also wants to slash annual labor expenses by $2.4 billion and wants to use more regional jets, which are less costly to operate.

Any of the proposals would have to be approved by the airline's creditors and the bankruptcy court.

United parent UAL Corp. lost a worst-ever $3.2 billion in 2002, accounting for roughly one third of the airline industry's combined losses.