Business fliers critical of plan to switch to Ted flights for Vegas

Thursday, March 25, 2004 | 11:15 a.m.

United Airlines' strategy to bulk up on the leisure market in Las Vegas will leave its most loyal business customers no options for first-class service, critics of the plan say.

But United officials say they know what they're doing and that the lower fares the airline will offer will keep business travelers happy.

Suburban Chicago-based United announced Tuesday that it would inaugurate service in May from Chicago to several destinations on Ted, the company's new low-cost carrier subsidiary. Included in that announcement was the disclosure that all of United's mainline service between Chicago and Las Vegas would be converted to Ted flights during June.

In all, there are eight Chicago-Las Vegas flights being converted to Ted and because the Ted flights will operate daily while some of the mainline flights don't, Las Vegas will have a net gain of 96 seats a day coming into the market.

United already has converted all of its flights between Las Vegas and Denver to Ted and, by the end of April, all its routes linking Las Vegas with Los Angeles, San Francisco and Washington's Dulles International Airport will be changed.

Most of the mainline United flights are on Boeing 737 jets, but the Ted flights will be on more fuel-efficient Airbus A320 jets with 156 seats.

But all of those seats are narrower and, critics contend, less comfortable than a first-class seat on a mainline United flight. In addition, first-class United customers have a special line they can use to pass quickly through airport security, but that would go away in June because Ted flights have no first-class cabins.

When the Chicago conversion is complete, every United flight to and from McCarran International Airport will be on Ted, which debuted in February as United attempted to regain market share from low-cost carriers primarily flying to leisure markets like Las Vegas and Florida.

United will have 33 Ted flights and six operations on its United Express commuter service, making it the third-busiest commercial passenger carrier in Las Vegas. It will be the only United station with all Ted flights.

The all-Ted United operation in Las Vegas has generated criticism.

Scott McKain, a Henderson-based author and business speaker, said he is a loyal United customer, flying more than 220,000 miles in 2003 and 2004 to speaking engagements and business meetings.

The author of "All Business Is Show Business" also is vice chairman of Indianapolis-based Obsidian Enterprises Inc., a holding company that buys small companies and enhances their business plans.

"I learned from our business that if you treat your loyal customers well, then good things happen," McKain said. "For a lot of us in Las Vegas or any (business) flier coming to Las Vegas, United is not delivering the service they promised to provide."

After he received a form-letter response to a letter he wrote to United, McKain launched an Internet website -- www.dontflyted.com -- to express his dissatisfaction with United's plan to make replaced mainline service with Ted. The site uses Ted colors and features photos of Ted planes with slashes through them.

"I've spent hundreds of thousands of dollars on United," McKain said. "I did what United said I had to do to earn upgrades. I did my part. It's them changing the deal."

McKain said he doesn't want to end his relationship with United and, in fact, hopes the airline, which is operating under Chapter 11 bankruptcy protection, succeeds. He said he has flown from Obsidian's home base in Indianapolis to Chicago so that he could fly United to Orlando, Fla., instead of taking a direct flight on Delta.

McKain has flown Ted, but is unimpressed, calling it a "me-too product" that mimics Song, JetBlue and Frontier.

"It's a horrible business decision on their part," McKain said of the Ted policy in Las Vegas. "They look at Las Vegas exclusively as a leisure market. That shows that United isn't watching what's going on in the Las Vegas market."

Since the website went up, McKain said he has been contacted by Continental and America West for his business.

Randy Walker, Clark County's airport director, said he's sure United customers who enjoy the shorter first-class line through security checkpoints at McCarran's D gates will be disappointed when that disappears.

Walker said he hopes United succeeds with its Ted project, but he also said he knows that if one airline doesn't provide what the public needs, another will arrive and pick up the slack.

An airline analyst said leaving customers without a first-class option could chase passengers to United's rivals when they come for conventions or other business travel.

"I'm not a big fan of Ted or (Delta Air Lines subsidiary) Song," said Robert Mann, an analyst for R.W. Mann & Co., Port Washington, N.Y. "What Ted says to Las Vegas-based business travelers or business people traveling from Chicago to Las Vegas is that you may want to look for another carrier, unless they really like Ted."

Mann said it's clear that United hopes to capitalize on the massive leisure market that feeds Las Vegas' casinos, "but on the other hand, it turns a deaf ear toward business travelers that are dedicated United customers."

A spokesman for Las Vegas' largest travel agency said of the major legacy carriers, United is probably the least chosen for corporate travel.

"Most will fly Delta, America West, Northwest, Continental or American before they would fly United," said Stewart Dahl of Prestige Travel in Las Vegas.

"America West has its second hub here, so it has a lot of direct flights to several places," Dahl said.

Most of the major carriers operate hub-and-spoke operations, meaning that passengers can fly from Las Vegas to a hub city, then directly to their destinations. Passengers on American fly to Dallas, Chicago and San Jose, Calif.; travelers on Delta fly to Atlanta, Cincinnati or Salt Lake City; those on Northwest go to Minneapolis or Detroit.

"But people who have frequent-flier programs are going to be loyal to that airline," Dahl said. "I've seen some business travelers fly another airline to Dallas and then get on their preferred airline there so that they can earn points and travel first class."

Dahl said he also found it unusual that United, with its Ted product, would compete in a niche dominated by Southwest Airlines in Las Vegas. Southwest and United actually compete only directly on one route -- Los Angeles. But while United goes to San Francisco, Southwest flies to Oakland, Calif. United serves Washington at Dulles while Southwest flies to nearby Baltimore. And while United goes to O'Hare International Airport in Chicago, Southwest flies to Midway Airport.

United officials have said that they don't think their most loyal customers will be put off by Ted and that United passengers will continue to collect frequent-flier miles on Ted flights.

They also have pointed out that their most loyal customers will be routed to the first 11 rows of Ted flights -- the "Economy Plus" section of the plane, which has 4 inches of additional leg room per seat. Each Ted flight will have 66 of those seats on the 156-passenger jets.

Sean Donohue, vice president of Ted, said United's research involving business customers found that price -- not first-class seats -- are what travelers are most interested in.

"When we introduced Ted, we significantly dropped the business fare by offering a walk-up fare of $299, down from $1,100 (on some routes)" Donohue said. "So business customers not only are going to see a significant drop in prices but also more seats in Economy Plus."

Donohue said part of United's research was to take a close look at first-class demand. He said less than 3 percent of the first-class seats coming into the Las Vegas market were purchased over the last two years with the rest given to upgrading passengers and employee standbys.

Donohue said Las Vegas is a popular destination for redeeming frequent-flier mileage for free trips, but most passengers who do that acquire a coach seat.

He said he would hate to lose a customer like McKain.

"Clearly, he is a good customer of United," Donohue said of McKain. "But because this is a brutally competitive industry, we're seeing that the carriers that are growing fastest are the ones going into leisure markets like Las Vegas. In order to service Las Vegas and other leisure markets, we must have a financial model that works. At the end of the day, we don't want to see less flights and less seats.

"If it made economic sense to fly first class into Vegas, we'd do it," he said. "But we'd need to do it in an economically sensible way."

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