Ted’s Dead

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

United plans to reconfigure Ted’s fleet of 56 Airbus 320s with first class seats and re-brand them as United planes starting in spring 2009. United also said it would remove 100 aircrafts from its fleet, retiring the oldest and the least fuel-efficient planes. The move will reduce its domestic mainline capacity 18% by 2009. Additionally, 1,400 to 1,600 management-level employees — or almost 3% 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% 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 written 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 subbrands 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 videogames. 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 subbrands, analysts doubted that Song and Ted were moneymakers when flying head-to-head against other discount carriers.

During the 1990s, carriers experimented with no-frill brands like Delta Express, Continental Lite, Shuttle by United and US Air’s MetroJet. The demise of Ted closes the second cycle whereby airlines unsuccessfully attempted operating low fare extensions.