argest of the six car riers, followed by Delta, Northwest, and USAir, each of which is growing rapidly (McKellin, 1988).
A combination of factors the worst economic recession since the Second World War, the air traffic controllers' strike, and deregulation of the airlines industry contributed to the development of the worst depression in the passenger carrying segment in history during the 1982 1983 time period (McKellin, 1988). Since early 1984, this segment has been in a recovery. Being in a recovery, however, is not a guarantee of profitability. Discount pricing has maintained competitive pressures in the passenger carrying segment, although the general economy has returned to health (Graham, 1989a). 3
In the context of operations, the most serious factors for United Airlines (and for competing carriers) are (1) discount pricing, (2) revenue seat capacity growth, (3) market growth, and (4) the control of operating costs (Graham, 1989a). In the deregulated environment, dealing effectively and directly with the problem of discount pricing has proved to be difficult. Therefore, many airline companies, United Airlines among them, have dealt with the problem indirectly. The strategy has been one called critical mass (McKellin, 1988). The critical mass strategy recognizes that market share cannot be secured by pricing alone; a good level of traffic, and a loyal customer base are also required (McKellin, 1988). The critical mass strategy calls for the building of an extensive route network to attain market share and revenue goals.
Revenue seat capacity in the passenger carrying segment is expected to rise by 10 percent in 1990 (Graham, 1989a). This growth is particularly troublesome for the players in the seg ment, because slower growth in the general economy has caused passenger market growth to flatten (Graham, 1989a).
To attack the problem of operating cost control, the major carriers in the industry, including Uni...