While Boeing and Airbus tussled over the merits of the sonic cruiser, another debate about market segmentation was taking place on the sidelines, this time over the use of the corporate jet.

The discussion was sparked off by United Airlines, which had announced ahead of the Paris air show that it intended to set up a potentially huge corporate jet business. Faced with increasing competition from business jet fractional ownership plans, United decided to step in to fight for its first class passengers.

United launched its new subsidiary - BizJet - in reaction to the impact that the almost 4,000 fractional plan participants have had on premium-class sales. These ultra-high end travellers are, in the words of Gulfstream senior vice-president Eric Hinson, "tired of subsidising the guy in the back of the plane and paying the consequences - delays, crowds, etc - for having him along for the ride."

As a consequence, BizJet will focus on making the high-yield passenger's experience entirely different from that of the everyman. This initiative will mean not just different lounges and sections of the aircraft, but different aircraft and different airports altogether.

While many question the logic of United cannibalising its own first class cabin, the airline is said to have determined that its current service offerings were losing these passengers anyway and that it might as well keep them in its orbit. As a consequence, the new entity - which will feature fractional ownership and charter components - says it will own approximately 200 business jets by 2006. Although BizJet will operate independently of the parent, it will benefit from United's customer database and also, perhaps, joint purchasing opportunities.

Manufacturers are mostly enthusiastic about the prospect of airlines entering the arena. Gulfstream, with whom United has orders for 35 aircraft (12 are firm), says it is excited about the growth airlines will bring to the market.

Colin Stuart, vice-president for marketing at Airbus, says that its own corporate jet - the ACJ - will be a weapon in the segmentation battle. Big, global companies will see the efficiency benefits of using such jets - both operated independently and by the airlines - to move their executives around, he argues.

However, Bombardier, which sees airline entrants as both a possible customer and competitor to its own fractional ownership programme, is more wary. "I think United will see that running a fractional ownership operation is a lot different than running a scheduled airline," says corproate jet programme spokesman Leo Knaapen.

Source: Airline Business