United Airlines announces changes to Recovery Plan

 United announced today several policy changes aligned with current market conditions and overall corporate objectives.

“These changes are part of United’s overall strategic plan to cut costs wherever possible, while maintaining a product that our customers have told us is important to them,” said Chris Bowers, senior vice president-Marketing, Sales and Reservations. “At the same time, we must be sure that our products and services are priced appropriately for the value they offer.”

United’s policy changes will apply to customer upgrades; fare rules; and discounts on sale, promotional and other already deeply discounted fares.

Upgrades

In the fall, a number of changes will be implemented for United’s upgrade program.

“Upgrades are a major motivator for our customers,” Bowers said. “Consistently, we receive feedback from our best customers that upgrades are too complex and not simple to use. Today we are announcing a number of policy changes to make travel easier.”

· United is streamlining and simplifying the markets where customers can use their upgrades, giving them greater flexibility and ease of use across United’s network. The number of upgrade award levels has been reduced to two. (effective first quarter 2003)

· Internationally, United is simplifying the number of miles needed for Mileage Plus Award upgrades.

· Over time, United will move to automate all customer upgrades, similar to previously announced e-ticket initiatives.

· As an added bonus for Premier members of United’s award-winning Mileage Plus program, upgrade clearance policies will increase to 48 hours before departure, from 24 hours. All other upgrade clearances will follow existing time lines. (effective first quarter 2003)

· Lastly, the monetary purchase price and miles needed to purchase upgrades will be increased effective, Oct. 1, 2002 – the first increase since 1996. This will not affect the way that customers earn complimentary upgrades, or applicable booking codes.

Monetary purchase price:

Premiers, Premier Executives, 1Ks

Four, 500 Mile Upgrades -- $200

General Members and other customers

Four, 500 Mile Upgrades -- $325

Mileage Purchase Price:

Eight, 500-mile upgrades – 50,000 miles

Miles for North America Mileage Plus Award upgrades

Y/B Booking Codes – 8,000 miles

All other booking codes – 15,000 miles

Miles for International Mileage Plus award upgrades:

Y/B Booking Codes – 15,000 miles

C/M/H Booking Codes – 30,000 miles

Clearance Policies

1K 100 Hours before departure

Premier Exec 72

Premier 48 an improvement over the previous 24-hour policy

General member/Non-member 24

Fare Rules

Due to the dramatic reduction in published fare levels and in support of the company’s recovery plan, United has a renewed commitment to the integrity of our fare rules.

As a result, effective August 28, 2002, United will no longer allow waivers on fare rules, including, but not limited to:

· Advance purchase;

· Ticketing time limits;

· Minimum/maximum stay requirements;

· Administrative service charges; and

· Other requirements and tariff rules.

United will be enforcing these rules internally and throughout the corporate and travel agency community. The company will no longer be granting Fare Rule Waivers on any fare. This applies to North America and all International markets.

Discounts on Sale, Promotional and Other Deeply Discounted Fares

Continuing with its cost-saving efforts, as previously announced, the company also is eliminating discounts on sale, promotional and other deeply discounted fares when negotiating contracts with corporate customers. This applies to North America and all International markets.

“While we are doing all we can to maximize revenue, the growth of low-cost competitors and the soft economy are out of our control,” says Bowers. “We believe even when the economy improves, the changes in air travelers’ habits and attitudes, and the impact of low-cost carriers, will keep revenues depressed. A continued focus on lower costs is vital to United's future.”

Other cost-saving initiatives include:

Paper Tickets

As United continues to leverage technology to better serve its customers, the company recently announced that it will move to full electronic ticketing. United will stop issuing paper tickets within the United States by July 2003; the carrier plans to issue only electronic tickets for all eligible itineraries, at all locations - domestic and international - by January 2004.

Effective September 1, 2002, United’s $20.00 paper ticket fee will apply to all customer-requested paper tickets issued in the United States, U.S. Virgin Islands and Puerto Rico for E-Ticket eligible itineraries, including those issued by travel agencies. The fee applies for printing transactions, either at the time of original ticket issuance or upon request to convert existing electronic tickets to paper. Travel agents should collect this fee on a Miscellaneous Charges Order (MCO).

Corporate Solutions

United announced in March that it is implementing Corporate Solutions, a contract management system for corporate sales agreements.

Corporate Solutions provides the technological tools to develop, track, analyze and generate contracts tailored to the specific needs of a corporation. The system also will issue reports for improved contract financial performance, higher market share and better customer communications, therefore establishing a more collaborative relationship with customers.

“Corporate Solutions is the centerpiece of a suite of enhancements to our way of doing business that will benefit our customers and us," Bowers explained. "We have a unique opportunity for positively changing the way this part of the business is done."

Back-to-Back Ticketing

As a result of an audit of tickets earlier this year, the company detected a sizeable number of transactions that involve violations of its tariff rules.” The prohibited practice is commonly referred to as “back-to-back ticketing.” Flight coupons across tickets are used in an order other than that in which they were issued. Ultimately, it results in a wrongful effort to obtain a discount to which the customer is not entitled.

This resulted in travel agencies receiving formal notification in June of United’s plan to enforce its ticketing rules, including suspending or terminating the agency’s ticketing authority on United and taking action against the agency to recover the difference in fares by:

Requiring the traveler to pay the applicable fare differential; or 
Issuing a debit memo to travel agencies for the fare difference and collecting the amount due in full.

United Airlines also confirmed today that it has met with representatives of its employee groups and informed them that, for purposes of its enhanced recovery plan, it has set a cost-savings target of $2.5 billion annually over the next six years.

This $2.5 billion in cost savings includes $1.5 billion in annual labor-related cost reductions. The company believes that the $2.5 billion target will better align costs with anticipated future revenues and increase the likelihood that the company will qualify for $1.8 billion in loan guarantees from the Air Transportation Stabilization Board.

United Airlines operates more than 1,900 flights a day on a route network that spans the globe.