United Air to beef up travel perks, offerings-CEO

April 19 Thu Apr 19, 2012 1:03pm EDT

April 19 (Reuters) - Air travel demand for the prime summer vacation season is strong, which supports higher fares, but United Airlines aims to bolster other sources of revenue by selling new products and services, the chief executive of the airline's parent United Continental Holdings said on Thursday.

Speaking to reporters after a speech in Chicago, Jeff Smisek said the company is planning to unveil some new offerings now that it has integrated its reservations system with that of its 2010 merger partner Continental Airlines.

The airline industry, battered for years by soaring fuel costs and economic weakness that drained travel demand, has relied more heavily in recent years on charges for services like bag checks, food, entertainment, seat selection and other perks.

"We also, of course, are expanding the ancillary products and services we will sell that customers will buy. We've held in abeyance a lot of that," Smisek said, declining to say what the company planned to offer next.

"I'm not allowed to talk about it, but they're going to be good and they're going to be cool," he said.

When pressed on the nature of the offerings, Smisek pointed to another United service called Fare Lock, that allows customers to pay a fee to reserve a booking and lock in a fare until they are ready to commit to it.

United Airlines is the world's largest airline. It was formed from the merger of United Airlines and Continental Airlines. The new company is based in Chicago and run by Smisek, who was chief executive of Continental before the merger.

The U.S. airline industry has managed to pull itself out of a steep downturn last decade by downsizing and selling fewer seats, which enabled it to boost fares.

The mergers of United with Continental and Delta Air Lines with Northwest Airlines to form a new Delta also helped stabilize those carriers.

But the pricing power that airlines have enjoyed over the past year could diminish this year if passengers, who are already paying higher gasoline prices, resist paying more for airline tickets. Airlines typically see their best revenue in the busy summer leisure travel season.

On Wednesday, United matched a fare increase by rival Delta, according to FareCompare.com. Smisek declined to comment directly on the outlook for more fare hikes.

"I think we're seeing good demand," Smisek said. "I'm comfortable with what we're seeing."

Last month, United adopted the reservation system of its merger partner Continental Airlines last month, triggering computer glitches that resulted in flight delays, faulty kiosks and jammed phone lines.

The project coincided with changes to United's frequent flier program, spurring a flood of phone calls, resulting in waits to speak to customer service agents. United faced customer backlash over these problems, but Smisek said wait times are much shorter and those operations are returning to normal.

He said the trouble stemmed from attempting so many changes to complex customer-facing processes at once.

"We decided to have one open-heart surgery, not five," he said.

United is set to report its first-quarter earnings next week. Analysts expect airlines to be mostly unprofitable for the quarter, but profitable for the year. Southwest Airlines and bankrupt AMR Corp, the parent of American Airlines, posted quarterly losses on Thursday.

Shares of United Continental were up 1.1 percent at $22.95 on the New York Stock Exchange.

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