This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

UAL: Ted Better Off Dead

CHARLOTTE, N.C -- Give Ted credit. Most likely it was doomed from the time it began flying in 2004, yet it lasted far longer than expected.

United Airlines, a unit of UAL (symbol), said Wednesday it will close Ted, a low-fare airline within an airline, in 2009 and reconfigure its 56 A320 aircraft with first-class seats. Ted serves leisure destinations from Denver and other United hubs.

Oddly, Ted started after a series of similar experiments in the airline industry had failed.

"There were many examples preceding Ted where split-personality airlines simply didn't work," says aviation consultant Scott Hamilton. "Despite this history, UAL management thought they had a better mousetrap."

Like its predecessors, Ted represented a legacy carrier's effort to mimic Southwest (LUV) and other low-cost competitors by starting a unit with lower fares, lower costs, all-coach seating and quicker turns.

In every case, it turned out to be impossible to strip out enough of the costs from the legacy model to compete effectively with low-fare carriers. One indication of this syndrome was that the legacy carriers almost invariably refused to break out financial results for their low-fare operations.

To be sure, Ted was part of a second round of experimentation, along with Song by Delta (DAL). The first round generally involved older aircraft and uninspired marketing, while Song and Ted focused on a hip image and occasional amenities. Ted even used relatively new A320 aircraft.

Nevertheless, the basic problem did not go away, and most experts were sour on Ted from the start. "When it started, I said that in five years it would be a footnote in the financial statement," says aviation consultant Robert Mann. "It may have taken a little longer, but the result was the same.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,365.38 -15.03 -0.09%
S&P 500 1,898.52 +11.76 0.62%
NASDAQ 4,301.0810 +42.6430 1.00%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs