United to make second attempt at low-fare carrier

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UAL Corp.'s United Airlines is advancing its plan to start a low-fare carrier code-named Starfish.

Starfish is expected to compete in heavily traveled leisure markets such as Florida and Las Vegas with Southwest, JetBlue and Song, Delta's no-frills carrier launched earlier this year.

United CEO Glenn Tilton issued a voicemail message to employees that provided scant details for the new airline, but confirmed United will again try the airline-within-an-airline idea by providing 40 planes from its existing fleet to the new carrier.

"I want you to know a considerable amount of time and thought and analysis has gone into how we can selectively compete in the low-cost market," Mr. Tilton said in the message to United employees, adding that UAL VP Sean Donohue would run Starfish.

United declined to comment further.

This is United's second attempt at the concept, having run Shuttle by United for seven years until it failed in 2001. Last month, one of United's regional commuter affiliates, Washington Dulles-based Atlantic Coast Airways, announced it would end its 14-year relationship with United and become its own stand-alone discount airline.

United hopes to emerge from bankruptcy later this year. A new low-cost airline was touted as the key component of its bankruptcy recovery plan. UAL must file that plan by an Oct. 6 court deadline.

surprise move

But after United won larger-than-expected pay concessions from its labor unions earlier this year, many suspected UAL would shelve the project. That's why Mr. Tilton's plan to forge ahead surprised employees and industry analysts.

"I just don't see how the airline-within-an-airline is going to work for any carrier, not just United," said one analyst. "To me, there's just an identity and branding problem there. Either you're a JetBlue or a Southwest and you're already no-frills, or you're not."

It is not known when United plans to launch Starfish or what its advertising plans will be. United's agency is Fallon Worldwide, Minneapolis, a unit of Publicis Groupe, but a Fallon spokeswoman declined to comment on whether the agency would handle advertising for Starfish, referring calls to the airline. Jerry Dow, United's director-worldwide marketing communications, could not be reached for comment.

After launching a print-only campaign in June ("We Are United"), the airline and Hilton Hotels Corp. last week launched the "Go. Go. Stay." promotion, in which passengers who fly to any of United's 189 worldwide destinations receive a discounted fare and are eligible for a free night at a participating Hilton hotel.

The campaign, from Fallon, is backed by TV, print and radio executions in United's five hub markets of Chicago, Denver, Los Angeles, San Francisco and Washington, D.C., as well as Seattle, Boston and New York.

Spending was not disclosed, but United spent $5 million on the print-only campaign in June. At the time, Mr. Dow said the campaign would not be a "one-shot" and that the company was looking for a "sustained effort."

United's ad spending has dropped considerably since a high of $75.1 million in 2000, according to TNS Media Intelligence/CMR. Last year, the airline had $57.9 million in measured media; through the first four months of this year, it spent $8.3 million for a projected total of $33.2 million.

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