Low-fare airlines battling for West

Wednesday, Oct. 30, 1996 | 11:59 a.m.

On the West Coast, United Airlines decided two years ago that to hang onto its business travelers in the face of competition from low-cost Southwest Airlines it had to go beyond saturation scheduling and create a true shuttle.

Copying some of Southwest's tricks for cutting costs and turning planes around quickly, but preserving baggage check-in and first-class service to accommodate travelers connecting from long-distance flights, Shuttle by United has proved a success.

Shuttle is hanging on in the competitive, lucrative West Coast market and some of that competition has filtered into Las Vegas.

Today, Shuttle operates 12 flights a day between Las Vegas and Los Angeles and 14 a day to San Francisco according to United Airlines' Internet home page.

The U.S. Department of Transportation said United filled 70 percent of its seats on flights to Los Angeles in May, the most recent month for which comparative statistics are available, while Southwest filled 60 percent. Southwest has 19 daily nonstop flights between Los Angeles and McCarran International Airport.

The airlines don't compete head to head in the Bay Area market, with United serving San Francisco International Airport directly from McCarran and Southwest flying to Oakland and San Jose.

United is making gains on Southwest in Las Vegas, although it's difficult to pinpoint how much of that is attributable to the Shuttle service. California markets represent a small percentage of Southwest's and United's passenger totals at McCarran.

The Clark County Department of Aviation reported a 22.8 percent increase in year-to-date traffic through September for United compared with a 17.9 percent increase for Southwest. County statistics don't break out Shuttle flights as opposed to United's main line.

In 1991, Southwest expanded in a big way in California, the nation's most heavily traveled air corridor. By 1994, United saw its market share erode to 29 percent, even as Southwest had gained 47 percent.

While American Airlines walked away from its high-frequency West Coast routes in the face of Southwest's onslaught, United calculated that pulling out or scaling back would be ruinous for its profitable Pacific route system.

"You start pulling away your little routes and soon you can't feed your transcontinental or international routes," said United spokesman Tony Molinaro.

The employee-owned carrier was able to adopt new work rules for the Shuttle by United, including a requirement that shuttle pilots work more hours for the same pay. It reduced costs from 10.5 cents for an available-seat mile to about 8 cents -- and as pilots bid for shuttle duty, it proved most popular among senior pilots, who appreciated being home most nights.

United nearly doubled its daily departures, to 410, and added six cities, including Salt Lake City and Spokane, Wash., for a total of 18.

The upshot: Its shuttle now commands 41 percent of the traffic between San Francisco and Los Angeles, to Southwest's 43 percent.

Shuttle by United is "a major success," said Brian Harris, an airline analyst for Lehman Brothers. "It's vacuuming up business travelers and sucking them into the United system."

Harris said United does not make a lot of money from shuttle fares, but the "halo effect" is considerable. That is, business travelers choose the United shuttle mainly to concentrate their frequent-flier miles in one program, and increasingly also choose United for nonshuttle flights.

That, Harris said, has the effect of contributing $321 million in revenue to the rest of United's system. And in the third quarter this year, the shuttle posted a profit on its own, as revenue increased 15 percent.

Now that United and Southwest have settled down to sharing the market, fares are rising. Once as low as $19 each way between Los Angeles and San Francisco, they now average $60 to $70.