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Wed, Jun 04, 2008

United Airlines Plans More Cuts To Staff, Capacity

No More 737s; Ted Dead, Too

Managers at United Airlines are advised to look out for machete-wielding "efficiency experts" roaming the halls in Chicago. On Wednesday, the world's second-largest airline announced it plans to slash as many as 1,100 salaried jobs in the coming months, as the airline continues to falter under the burden of high fuel prices.

United also announced it will ground an addition 70 aircraft, on top of 30 planes already taken out of service. And "Ted," United's one-time (and, arguably, ill-conceived) attempt to capture a share of the low-cost market, will soon be euthanized, as well.

It's the second time in as many months United announced plans to cut back its operations, reports Bloomberg, and comes days after merger talks between the airline and US Airways officially came to an unresolved end.

At that time, United CEO Glenn Tilton said the airline would continue on as an independent carrier... and this is how they plan to do it, in the face of a projected $3 billion increase to its 2008 fuel bill.

"These are very aggressive domestic capacity and cost cuts," said Calyon Securities analyst Ray Neidl. "If oil stays at $130 or $120 a barrel, I expect you'll see additional big cuts."

United plans to park its entire fleet of Boeing 737-300 and -500 aircraft, as well as six of its aging 747-400 long-haul widebodies -- a full 15 percent of its current mainline fleet. Although United aims to cut domestic capacity, some short-haul capacity will be recouped by Airbus A320 Family planes coming off service with Ted... which in recent years was operated as part of the mainline carrier anyway.

"The older 737s that United will retire consume up to 20 percent more fuel per seat on a typical domestic flight than the more modern A319s and A320s that the company operates," said Douglas Runte, managing director at RBS Greenwich Capital in Greenwich, CT.

United announced in April it planned to slash 500 management jobs. The latest workforce reduction will also involve only salaried positions, further reducing United's top-heavy management structure... though the carrier plans to cut union payrolls, as well, down the line.

With the grounding of six fuel-thirsty 747s, United even plans to cut back its profitable international operations... yet another sign fuel prices are taking a profound toll on the carrier's bottom line.

"While these are difficult decisions that will impact many of our employees, they nevertheless must be made if we are to assure United's long-term viability," Chief Operating Officer John Tague said in a message to employees.

FMI: www.united.com


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