- The Washington Times - Thursday, December 12, 2002

United Airlines' bankruptcy filing Monday is another step in forcing the airline industry to adopt a business model that has made low-cost carriers successful while the largest airlines hemorrhage money, according to industry analysts.
Large airlines use a hub-and-spoke model in which flights are clustered around peak flying times at a few major airports.
Low-cost carriers, such as Southwest Airlines, JetBlue Airways and Airtran Airways, do not use hub airports. Instead, they fly "point-to-point," which means they adjust their schedules and routes frequently to keep airplanes flying longer with the maximum number of passengers.
The hub-and-spoke model is the most convenient for passengers, but the "point-to-point" system can bring in the most money on shorter routes.
"Short-haul routes are not United's speciality," said Ray Neidl, an airline industry analyst for Blaylock & Partners investment firm.
Until now, short-haul routes have been a small part of United's business, primarily to channel passengers into hub airports.
UAL yesterday named Douglas Hacker executive vice president of strategy for United Airlines to help the airline emerge from bankruptcy.
Mr. Hacker, 47, will be responsible for the airline's corporate strategy, helping revive sales and managing costs, the company said in a statement.
Mr. Neidl predicts that United will focus more of its business on operating smaller regional jets to cut costs and eliminate excess seats.
"With regional jets, they can add frequency," Mr. Neidl said. "By getting their cost structure down and becoming more efficient, they want to become more cost-competitive with the low-cost carriers."
As a result, United could emerge from bankruptcy as "a mean competitor," he said.
Other industry analysts are predicting United will shed its least-profitable routes to reduce expenses. The low-cost airlines say United's loss could be their gain.
"We're always looking for profitable opportunities to grow our airline," said Tad Hutcheson, spokesman for Orlando, Fla.-based Airtran Airways.
One of those opportunities is likely to be routes abandoned by United, he said.
The hub-and-spoke business model "was a great innovation, but it is no longer economically sustainable in its current form," said Tom Hansson, head of the airline practice for the management consulting firm Booz Allen Hamilton.
On flights of 500 to 600 miles, low-cost airlines spend 7 to 8 cents per airplane seat for each mile traveled, according to a Booz Allen Hamilton analysis. Large airlines spend close to 15 cents per seat-mile.
"The pace and complexity of operations associated with maximizing revenue within the traditional hub-and-spoke business model account for some 65 percent of the gap," Mr. Hansson said.

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