July 3, 2006 – Network Presence

Glenn:

Good morning. It’s Monday, the third of July. Today, Greg Taylor, our senior vice president of Planning, is joining me on the call to talk about the route decisions we make, how we make those decisions and how they impact our ability to optimize revenue.

As we discussed on last week's call, we're focused on a performance agenda in three areas: revenue optimization, cost discipline and customer experience. The work in the revenue optimization area is founded in the continued evolution of our network.

The Planning and Scheduling organizations are responsible for determining where to meet customer demand most effectively and, at the same time, optimize our revenue.

Accomplishing that in recent years, we have moved capacity from the U.S. market into the international regions. We have moved into the Caribbean and other leisure destinations and we have used our regional jet fleet to expand into smaller markets across the United States.

To discuss how we make routing decisions and our priorities for the future, I'll now turn the call over to Greg. Greg, over to you.

Greg:

Thanks, Glenn. Everything at United begins with the network. The network is not a collection of individual routes. It’s really a system of markets that all work together to generate revenue for the company by efficiently taking our customers anywhere they want to go. When we make a decision on a particular market – and Dulles-Kuwait service is a good example – we look at where we can generate additional revenue for our overall network. With Kuwait, there is significant demand from Washington itself, but there’s also an opportunity for more connections and new customers across the network.

Making choices across the network means that we build from our strengths. The ideal scenario in building new routes is flying from one point of strength to another. Minimally, we need to be strong in one city on the pair. We’ve found that we can’t make a route work economically if we’re weak in both cities.

For us and for all airlines, strength is defined by city presence. We establish city presence through the number of flights we offer, the number of markets served, corporate agreements and frequent-flier presence. And generally, the more city presence we have, the more city presence we get because a strong schedule means we can sign up more frequent fliers. It gives us better bargaining position with corporations. And then we increase demand in that city, which gives us the opportunity to grow our schedule even further.

As a result, we have deliberately concentrated our network out of our five U.S. hubs and Narita, drawing on our large customer bases in those cities and the excellent connection opportunities our network generates.

In places where we don’t have city presence, we work closely with our alliance partners who do. For example, our Frankfurt flights are some of our most successful European operations because we benefit from the connections Lufthansa delivers in its network. Lufthansa enjoys a similar benefit in Chicago.

Now looking forward, we see opportunities to expand across our network. Right now we have a lot of focus on China. It’s one of the best opportunities for us internationally. The market itself is exploding. And we can serve it from a number of our strong hub cities -- connecting customers from all over our network through the hubs to China. In other words, we serve our customers and generate revenue across multiple points in the network. We also see opportunity to add service between smaller U.S. cities into the hubs, particularly with regional jets. And with our partners in Europe, we can support service to some of the continent’s secondary markets.

Our goal, as we continue to make both short-term tactical changes and long-term strategic decisions, is to continue to build on one of the company’s core strengths. When we look across the industry, some of our competitors have advantages in areas – Continental, for example, is the only network carrier with a New York hub. And American has a strong hub in Dallas and the leading Latin American gateway in Miami.

But we have a complete system. We have five hubs in five serious business cities. Chicago, San Francisco and Los Angeles provide excellent access to the Pacific. Dulles is a good city to the Atlantic, and it has given us an answer that works for Latin America. We have great geographic presence across the U.S.

It is a base that offers nothing but potential to expand our reach and, along with our partners, bring the world to our customers. Glenn, back to you.

Glenn:

Thanks very much Greg. I know that we all appreciate the briefing. As Greg pointed out at the beginning of his remarks, our business begins with the network. However, just as important as building a competitive network is how we deliver that network to our customers and the quality of their experience when they fly United.

Our focus must be on the service we deliver our customers… weather, load factors, cancellations and delays are all realities that we must deal with. It's the job of all the planning organizations to prepare and respond with the best planning and preparation for those eventualities in support of all of you who work on the line, who work directly with our customers.

That’s all for now. I'll be talking to you again soon. Until then, stay focused on our customers, on one another…and stay united.