United Airlines and Alitalia slash costs

Airlines around the world showed more signs of distress yesterday, with United Airlines in the US announcing plans to slash its domestic fleet to boost profitability, while Alitalia said it had reached an agreement with Italian unions to cut 3,700 jobs to stave off bankruptcy.

Airlines around the world showed more signs of distress yesterday, with United Airlines in the US announcing plans to slash its domestic fleet to boost profitability, while Alitalia said it had reached an agreement with Italian unions to cut 3,700 jobs to stave off bankruptcy.

United, the world's second-largest carrier which has operated in bankruptcy for almost two years, said it would remove 68 planes, reducing its US fleet to 455 planes and bringing down capacity in its home market by 12 per cent.

The move is the latest attempt by one of America's major carriers to return to financial health after several years of difficulty, due to increased competition from low-cost rivals and falling passenger numbers in lucrative areas such as business travel. More recently, the sector has also struggled with higher fuel costs.

United, which is scrambling to cut $5bn (£2.8bn) in annual operating costs by 2005, said it would also boost its number of long-haul international flights, where the traditional carriers are still able to make substantial profits. Seats available on international flights will rise 14 per cent by March 2005.

The move echoes plans by American Airlines, the number one carrier in the world, which said at the end of last month that it would boost its international capacity by 16 per cent and reduce domestic capacity by 2 per cent this year.

Separately, Italy's near-bankrupt airline, Alitalia, said it had put in place the final piece of its rescue plan with workers and the government so it can draw on an emergency €400m (£280m) loan. That will involve making 3,700 workers redundant. Alitalia said the government had agreed to provide about €300m in financial aid for an unemployment fund which would be paid out over two years to the company's former employees.

Meanwhile, shares in Excel Airways nosedived yesterday after the charter airline revealed its biggest shareholder could launch a low-priced takeover offer. The company lost one-third of its market valuation after it admitted that Air Atlanta, an Icelandic airline group that took a stake in Excelthis year, had embarked on bid talks with its next biggest shareholder Libra, a Cypriot holiday firm, that could "materially" undervalue the Gatwick-based group.