Aggressive Ad Campaign Spotlights Shuttle By United As The First Choice of Business Travelers.

CHICAGO--(BUSINESS WIRE)--Sept. 10, 1997--A new advertising campaign by Shuttle by United takes off Wednesday by sharply contrasting the service the air carrier provides with that of its competitors.

The campaign, according to Shuttle by United President Amos Kazzaz, "will focus on benefits that short-haul frequent fliers prefer, including assigned seating, a strong daily flight schedule and a worldwide frequent-flier program."

The campaign is based on a comprehensive study of nationwide frequent travelers who fly short-haul jet service on any number of carriers, including Shuttle by United, Southwest Airlines, Delta Express, Alaska Air, US Airways, Northwest's Fasttrack service, United Airlines' BusinessOne flights and others. The Cambridge Group, with headquarters in Chicago, conducted the research for United Airlines.

Kazzaz added that Shuttle by United undertook the study as part of United's renewed emphasis on customer service called the Customer Satisfaction Philosophy, or CSP. The CSP is the blueprint for action that will enable the airline to transform air travel in the next several years. United's current and future service enhancements, employee training programs and customer communications have been based on the CSP -- a move which United believes will set it apart from its competitors and motivate employees to new heights of customer service.

Developed by the employees of United Airlines, Shuttle by United is a short-haul travel leader with 452 daily departures in 20 cities in the Western United States. The Shuttle will grow to 466 daily departures Oct. 31 with new service between Denver and Salt Lake City.

Redefining Short-Haul Air Travel; From Leisure "Clone" to the Airline of Choice for Business Travelers

Following deregulation, the U.S. airline industry emerged as a formidable force of economic power. But with that success came consequences, and for some airlines, demise. By the end of the 1980s, the airlines that remained found they had far too many seats chasing far too few bodies.

United Airlines was no exception. And the U.S. west region was proof.

United was quickly losing market share to a new breed of "short-haul" airlines that focused on flights of 500 miles or less. Southwest Airlines and other regional carriers were siphoning west region passengers from United with the lure of low fares and dozens of flights per day. They were operating cheaper, faster and more efficiently and global United couldn't compete.

But United had one thing its competitors didn't: the support of its employees-owners. In July 1994, United's Employee Stock Ownership Plan (ESOP) was approved. In addition to making United the largest employee-owned company in the world, the ESOP called for the development of a low-cost, short-haul service that would operate as an "airline-within-an-airline."

On Oct. 1, 1994, the employees and owners of Shuttle by United launched service from nine West Coast cities. The Shuttle faced fierce competition in nearly every market, but it was well prepared. Shuttle by United was a "lean and mean" operation with the resources to compete with the lowest of low-cost carriers. But that wasn't its only objective. The Shuttle was designed to reassert United's strength in the West, and its route system was strategically structured to connect passengers from across the West to United's key hubs for domestic, transcontinental and international flights. The Shuttle was built to support United's bottom line.

Targeting the Short-Haul Traveler

While it started as a "clone" of sorts, Shuttle by United offered a different mix of services than other airlines carrying passengers 500 miles or less. The Shuttle introduced a boarding system new to short-haul travel that, together with seat assignments, eliminated the "cattle-car" atmosphere for which other carriers were known. Shuttle also extended United's Mileage Plus privileges to passengers and provided seamless flight and baggage connections.

When Shuttle by United entered the market, the industry's short-haul formula was price driven and heavily focused on the leisure traveler. Shuttle by United followed suit with low fares and no frills. Yet, as a product of United Airlines, there were inherent differences in the Shuttle's short-haul platform. It was these subtle differentiators that attracted a previously undefined subset of the short-haul market -- the business traveler.

"When we launched the Shuttle, every short-haul carrier out there was targeting the leisure traveler," said Kazzaz. "Leisure travelers were given credit for expanding short-haul demand and were thought to represent the largest growth opportunity in the market. Yet, we started to see early on that large numbers of business travelers were flying Shuttle by United; on some routes outnumbering leisure travelers two-to-one."

Shuttle by United employees didn't ignore what was developing into a short-haul market niche. They continually evaluated services to ensure its short-haul business travelers' needs were being met. Shuttle by United began offering pre-assigned seats to its top frequent fliers and kept is first-class section when other carriers scrapped theirs.

"From the start, the Shuttle offered a more professional travel experience, and to a degree, it was this subtle personality trait that set us apart," said Kazzaz. "By raising the standards for short-haul travel, we became the preference of business travelers in the West."

Back in Business in the West

The Shuttle's success helped United reassert its strength in the West. Between 1994-96, the Shuttle accounted for 90% of United's 200,000 per-month passenger gain in Intra-West Coast traffic. The Shuttle also has expanded to 20 cities from nine and increased daily departures 153% to 466 flights from 184 per day. Flights in and out of San Francisco have grown 280% and in Los Angeles, a whopping 366%.

Some 80% of Shuttle fliers are members of United's Mileage Plus program, more than double the industry average. It is the popularity of Mileage Plus that has turned many of the Shuttle's business travelers into frequent leisure travelers.

"It's not unusual to see some of our passengers flying for work during the week and then traveling for fun with their families on weekends," said Kazzaz. "Still, most travelers tell us the biggest benefit of frequent Shuttle flights are the intercontinental and international trips they earn on United."

The Shuttle funnels high-yield traffic throughout United's global system and has generated hundreds of millions of dollars in revenues for United since its launch. United's stock price has soared 241% since the Shuttle's inception, far outpacing gains recorded by the industry as a whole.

"Shuttle by United is doing its job -- expanding our overall market share and contributing to the bottom line success of United Airlines," said Kazzaz. "We've reached such high levels of success by giving passengers a better choice in short-haul air travel."

A Better Business Strategy

"After the ESOP was approved, we no longer had employees just working for the company," explained Gerald Greenwald, United Airlines' chairman and chief executive officer. "From that point on, our employees were the company, and everything that has made Shuttle by United a success is absolutely attributed to the employees and their efforts."

An empowered 40-member "system task force" representing all levels of company operations conducted much of the Shuttle concept development. Teams were directly involved in all decisions concerning reliability, scheduling, operations, customer service, onboard service, and marketing and sales issues. By examining the low-fare airline experience from the customer's point of view, task force members identified core processes required to succeed as an efficient short-haul carrier.

"Shuttle by United employee-owners looked at every procedure and said, `how can we make this better?'" said Kazzaz. "We refined our procedures and created a better short-haul flying experience."

The Future of Shuttle by United

Shuttle by United has changed short-haul air travel in 20 Western U.S. markets. The employee-owner momentum fueling Shuttle's success continues to build, as evidenced by the expansion of routes between Salt Lake City and Denver beginning Oct. 31, 1997.

"It's all about respect and recognition for the frequent business traveler. We're committed to offering the best product in the short-haul airline industry, with plans for continued growth and excellence in service," said Kazzaz. "Through the enthusiasm and teamwork of our employee-owners, Shuttle by United is redefining short-haul air travel."

CONTACT: United Airlines Corporate Communications 

Tony Molinaro, 847/700-4971

(nights/weekends), 847/700-4081

or

Fleishman-Hillard Inc.

Kimberly Goolsby, 714/831-7520

Julie Mathis, 213/629-4974