United Airlines by 2007 expects to cut distribution costs as much as $100 million annually as part of a companywide effort to further reduce non-labor expenses. The airline, which has been operating under bankruptcy protection since December 2002, said it achieved its first quarter mainline unit cost goal of 8.13 cents per seat mile, excluding fuel.
UAL executive vice president and COO Pete McDonald on Friday in a message to employees highlighted the distribution cost-cutting target and specifically cited "reductions in global distribution fees and commissions." He said the airline is "reviewing sales commissions country by country," which would yield $17 million in savings this year and $50 million by the end of 2007.
If achieved, those cost cuts would leave a global distribution system fee reduction target of $50 million annually. McDonald said $9 million in savings would be generated by use of Orbitz Supplier Link technology, which bypasses traditional GDS processing. Orbitz owner Cendant Corp. has said that Supplier Link generally is not used for corporate travel bookings.
United's distribution strategy includes use of other low-cost channels, development of direct corporate booking options and renegotiated deals with GDS companies
(BTNonline, Jan. 21). Its three-year deal with GDS operator Sabre--which requires United to provide full fare content in exchange for reduced GDS fees--is set to expire next April. Similar deals with GDS operators Amadeus, Cendant's Galileo and Worldspan also are scheduled to expire later next year.
In other United news, the company on Friday requested another extension for the time period in which it can exclusively submit to the bankruptcy court a restructuring plan. If approved during a court hearing on April 22, the extension would give management until July 1 to file the plan and until Sept. 1 to secure acceptance of the plan. The judge overseeing UAL's chapter 11 case on multiple occasions has granted extensions. The exclusivity period currently is scheduled to end April 30.