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United Airlines Calls on Commission to Address Escalating GDS Fees

26 June 2002

United Airlines (NYSE: UAL) Senior Vice President of Planning Gregory T. Taylor today testified before the National Commission To Ensure Consumer Information and Choice in the Airline Industry. The nine-person Commission was established by Congress and is charged with determining whether impediments exist to the distribution of schedule and fare information to the traveling public, and the effects on travel agents, on-line agencies and consumers. 

Taylor outlined the carrier's concerns regarding escalating global distribution system (GDS) fees for distributing airline tickets. Last year, United spent nearly $300 million on such GDS fees. His testimony pointed to the industry's need to provide consumers with distribution options that include traditional "brick-and-mortar" sources and expanded use of Internet and web site distribution sources. 

"Our largest and most important sales channel remains travel agents, linked to us through GDS systems. This distribution channel remains vital to United, and accounts for the sale of more than 70 percent of United Airlines revenue," said Taylor. However, Taylor explained that because travel agents rely on GDS systems, the reality of escalating GDS fees today makes travel agents United's most-expensive distribution channel. 

Taylor noted the U.S. General Accounting Office soon will study the issue of rapidly rising GDS costs, which impact consumers, "brick-and-mortar" travel agents who have to rely on GDS, and the airlines. 

"In today's extraordinarily challenging business environment, we simply cannot afford the old way of doing business," he said. " Distributing our airline tickets represent our third-largest cost component -- right after the cost of labor and the cost of fuel. In the cost of distribution, as in all our functions, we need to find the most efficient, most effective, and least-costly means of doing business." 

To that end, Taylor told the Commission panel that web fares are proliferating and new channels for their distribution continue to emerge. He said the value of web fares is that they generate incremental traffic and familiarize customers with new channels that have a lower distribution cost. United stated today, unequivocally and on the record, its willingness to offer its web fares to any distribution outlet that offers United a low cost of distribution for all traffic, not just web fares. 

He explained to the Commission panel that United does not take a "one-size-fits-all" approach to meeting its customers needs through existing distribution channels, which include travel agents, web sites, internet travel agents, in-house reservation agents, and corporate accounts, among others.

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