United Airlines forms e-commerce subsidiary

Chicago-based UAL's United Air Lines Wednesday announced the creation of a two-headed e-commerce monster that will focus on the development of United's house business on the internet and on investing in businesses leveraging Web and wireless technologies.

          Chicago-based UAL's United Air Lines Wednesday announced the creation of a two-headed e-commerce monster that will focus on the development of United's house business on the internet and on investing in businesses leveraging Web and wireless technologies.

          The Chicago-based subsidiary, called United NewVentures, will explore and take equity positions in internet distributors. United already owns pieces of online air auctioneer Priceline.com and its newly launched rival Hotwire.

          United also has been instrumental in forming Orbitz, an online travel agency set to start competing next year with Travelocity.com and Expedia.

          Doug Hacker, formerly United's chief financial officer and now president of United NewVentures, says the company plans to invest more than $US100 million during the next year in new partnerships and in building United's online brand.

          Hacker says the new subsidiary could spin off into a separate public company in the future, depending on its success.

          "Right now, we're at the work of creating value. . . . Once that has happened, we really should turn to that question [of becoming a separate entity]," Hacker says.

          Meanwhile, United's website and frequent-flier programme will be a division of NewVentures called United NetWorks. Scott Praven, who has headed the company's e-commerce operations, will be president of NetWorks.

          He says that roughly 5% of United's North American revenue comes through internet sales and that the company is looking to quadruple that number during the next three years.

          In August, Atlanta-based Delta Air Lines created an internal e-commerce unit to do much of the same work as United's external model. Delta officials say such ventures should stay within a company's walls.

          Praven argues that having the separate Chicago location, which is eight miles from United's main offices., allows his staff to work in a single space and to make unilateral decisions.

          Electronic ticketing and self-service kiosks haven't been included under United's e-commerce umbrella, but Praven says his division will be heavily involved in the development and implementation of those technologies.

          Henry Harteveldt, senior analyst for Forrester Research praises United for becoming aggressive about New Economy investment opportunities.

          He says the company needs to go even further with its model, incorporating all technological efforts and managing relationships with traditional distributors like Sabre and Galileo International, which are migrating portions of their businesses to the internet.

          "Focusing just on consumer stuff is only part of the challenge," Harteveldt says. "They have to think about how technology and the internet are going to change their whole business."

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