Launches Initiatives To Reduce Costs By $2 Billion Annually

United Airlines revealed plans Tuesday at its Investor Day conference in New York City to reduce costs, increase revenue and enhance profitability while delivering competitive reliability and excellent customer service. "We are working together to build on United's core strengths and deliver excellent long-term results for our investors," said Jeff Smisek, chairman, president and chief executive officer. "We are committed to achieving sufficient and sustainable profitability that will benefit all of our stakeholders."

The company has launched initiatives to reduce costs by $2 billion annually. The plan includes reducing fuel consumption, increasing productivity, reducing sourcing costs, improving maintenance processes and inventory procedures, and optimizing distribution methods. United aims to increase pre-tax earnings by two to four times the current level over the next four years and to generate sufficient cash to begin allocating capital to shareholders by 2015. This is in addition to the company's existing goal of achieving a 10 percent return on invested capital.

United plans to increase ancillary revenue by approximately $700 million, with a goal of generating more than $3.5 billion in ancillary revenue by 2017. The company expects to achieve this growth by giving customers new options, optimizing pricing on existing products and expanding availability of ancillary products through additional distribution channels. "Today we are announcing plans to significantly improve our efficiency, profitability and capital structure, making United a stronger, more investable business," said John Rainey, executive vice president and chief financial officer.

United is building on its strengths by leveraging its trans-Pacific and trans-Atlantic joint ventures to further develop its unmatched route network. The company expects to improve results on its trans-Pacific network by redeploying certain widebody aircraft, including beginning a second daily Houston-Tokyo service, subject to government approval, and eliminating Seattle-Tokyo flying. United also will eliminate Tokyo-Bangkok 747 service and down-gauge Tokyo-Seoul flights, reallocating those long-haul aircraft to more profitable routes. ANA, United's trans-Pacific joint venture partner, will provide the appropriate amount of the beyond-Tokyo connectivity for United's trans-Pacific flights.

The company will use its highly efficient 787 Dreamliner aircraft to provide service to new markets, including previously announced service from San Francisco, the premier Pacific gateway, to Chengdu, China, subject to government approval. This is in addition to new 777 service effective March 29 from San Francisco to Taipei. The company will capitalize on its ability to serve growing secondary markets in Asia directly from the United States, similar to its successful strategy serving secondary European markets non-stop from its East Coast hubs.

Using aircraft previously operated on intra-Asia routes, United is also building its trans-Atlantic flying with new service from Houston to Munich and new seasonal routes from Washington/Dulles to Madrid and Chicago to Edinburgh. The new Munich and Madrid service is subject to government approval. Additionally, United will introduce all-widebody service to the Newark-London Heathrow route during the summer peak season, nearly doubling the number of flat-bed seats on each upgraded flight.

The company is launching the next phase of its successful e-commerce strategy, which provides an aligned set of tools that better address the needs of today's mobile traveler. In addition to the new mobile app launched last week, United today previewed the new united.com. These enhancements will build on the company's strong e-commerce platforms by providing clear, customized shopping and booking experiences, expanding opportunities for ancillary product and service sales and increasing ticket penetration through direct digital channels.

FMI: http://ir.united.com/