United to Shut Down Ted Airlines

CHICAGO What remained of the airline-within-an-airline strategy for battling low-fare carriers was grounded this week when United Airlines said it would discontinue Ted Airlines.

United plans to reconfigure Ted's fleet of 56 Airbus 320s with first-class seats and rebrand them as United planes starting in spring 2009. United also said it would remove 100 aircraft from its fleet, retiring the oldest and the least fuel-efficient planes. The move will reduce its domestic mainline capacity 18 percent by 2009. Additionally, 1,400 to 1,600 management-level employees -- or almost 3 percent of the airline's workforce -- will be laid off.

Likewise, American Airlines last month said it would reduce its fleet by as much as 12 percent in the fourth quarter.

"This environment demands that we and the industry act decisively and responsibly," Glenn Tilton, United's chairman and CEO, said in a statement. "At United, we continue to do the right work to reduce costs and increase revenue to respond to record fuel costs and the challenging economic environment."

Ted is the discount airline brand launched by United in 2004, less than a year after Delta Air Lines introduced Song. Both sub-brands were part of a plan by their mainstream carriers to nab leisure travelers from discount airlines like Southwest, JetBlue, America West (now US Airways), Frontier and AirTran.

Song was acclaimed for its in-flight a la carte amenities like signature cocktails, food, movies and video games. In fact, some industry observers argued that the low-fare carrier was better differentiated than the parent brand. But Delta eliminated Song shortly after filing for Chapter 11 bankruptcy protection in September 2005.

Ted offered perks similar to Song, along with XM Satellite radio and free movies. Although financial results were not broken out for the sub-brands, analysts doubted that Song and Ted were moneymakers when flying head-to-head against other discount carriers.

Ted was never a big ad spender, having tallied a little more than $2 million in U.S. media during its launch year of 2004, per Nielsen Monitor-Plus. The carrier has been virtually inactive in recent years.