'I'm Ted, fly me': An airline's offshoot faces a test

Casting around for a cheap flight this winter? You could soon hold a ticket for a carrier whose name will have your cab driver certain that you're kidding.

Meet Ted, the airline.

Feeling entrepreneurial after nearly a year under bankruptcy protection, United Airlines trumpeted the launch of its discount-fare offspring Tuesday. Its name is derived from that of its proud parent.

Ted will target the niche - budget, recreational travelers - most recently courted by Song, which Delta rolled out in April. Ted's fleet, which is expected to grow to 45 planes by the end of 2004, begins service in February between Denver and such hot spots as New Orleans and Orlando.

"Ted is supported by a profitable and sustainable plan, with higher aircraft utilization, a simplified schedule, and more seats per aircraft," read a United release, reflecting more corporate sobriety than one might expect, given the cuddly name.

But airplanes cost a great deal to operate, whatever logo they wear. And some airline observers portray Ted and other such "airlines within airlines" as little more than a marketing gambit by the big players - and a recycled one at that.

"It's not United's first attempt at a low-cost carrier," notes Martin Dresner, an associate professor of logistics, business, and public policy at the University of Maryland. "They had a 'Shuttle by United' that operated on the West Coast," he says. It ended service in 2001, the same year US Airways shut down its MetroJet division. Song was preceded by Delta Express.

Not all of the failures can be chalked up to the Sept. 11, 2001, attacks. Mr. Dresner also points to Continental's CAL Light, which had a short run - never quite as a separate brand - in the early 1990s.

"None of them has been successful," says Dresner. "And I'm not sure what has changed that would make these [efforts] more successful than previous efforts."

One difference - the quirky monikers - may represent yet another post-Sept. 11 trend, some experts say. The aim: Establish an easy familiarity that takes some of the seriousness out of commercial flying.

"It comes down to right message, right timing, and right ambience," says Marian Salzman, executive vice president and chief strategy officer of Euro RSCG Worldwide, an advertising and corporate-communications agency in New York.

"It comes down to feeling and sounding human," Ms. Salzman says in an e-mail. As consumers, "we're juggling a need for technical excellence and safety with a [need for a] sense of humor and a smile."

Finding that formula has become a quest for many established airlines. Air Canada's bid to spice up its local-service image took the form of Tango in the fall of 2001. Last March, the Scandinavian carrier SAS stayed truer to its climate in launching a subsidiary called Snowflake. British Midlands launched BMIBaby last year. Qantas and Virgin Atlantic reportedly plan low-cost carriers this spring.

Observers say such spinoffs could see initial success. Indeed, while Delta has kept quiet about Song's early financial performance, it says per-passenger revenues are rising.

A new marketing campaign could raise the profile of Song, which is trying hard not to project "cheap." (Flight attendants will soon don Kate Spade uniforms, inflight-entertainment options are growing, and Song's sold-on-board food has won praise.)

Still, some experts maintain that it will be established, well-run "stand-alones" not linked to old-line carriers - EasyJet and Ryanair in Europe; Southwest, JetBlue, and AirTran in the US - that could end up at the top of the heap.

"I don't know what Ted's costs are going to be, but my guess is that they're not going to be as low as JetBlue's or Southwest's," says Dresner, who sees a disadvantage in having a big-name parent.

Making an offshoot succeed requires delicate labor negotiations, he says. There may be attempts to offload some of the parent's overhead onto the discount carrier, increasing its costs. And despite the happy face airlines put on new units, tension is bound to arise between parent and child over a range of issues, Dresner adds, including which one should fly which routes. Ted faces a test.