United Airlines cuts fleet to save costs

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UAL Corp, parent of United Airlines, will slash its domestic capacity and its labor force, following similar cuts by rivals, as the industry grapples with soaring fuel costs and a weakening economy, the company said on today.

The move, an extension of previous plans, calls for a domestic capacity cut of 14 percent in the fourth quarter. The reduction means the elimination of 100 planes from its fleet as well as 1,400 to 1,600 job cuts.

The job cuts include the previously announced layoffs of 500 salaried and management employees. The company also previously said it would cut 30 Boeing 737s from its fleet.

"With fuel at historically high levels, United and our competitors need to redefine ourselves in this marketplace. The answers are not easy, yet this environment demands that we and the industry act decisively and responsibly," UAL Chief Executive Glenn Tilton said in a message to employees.

UAL said it expects to retire all of its 94 single-aisle Boeing 737s if it can reach a deal with lessors. UAL also will retire six Boeing 747 jumbos.

Over the 2008 and 2009 period, UAL will reduce its mainline domestic capacity between 17 percent and 18 percent, and consolidated capacity - which includes regional flying - between 9 percent and 10 percent.

UAL's downsizing is consistent with recent steps taken by AMR Corp's American Airlines, which said last month it would cut its domestic capacity by 11 to 12 percent in the fourth quarter and cut more than a thousand jobs.

In March, Delta Air Lines, which plans to merge with Northwest Airlines, said it would cut 2,000 jobs through voluntary retirement and reduce its 2008 domestic capacity by 10 percent year over year.

Airline experts generally agree that the industry must cut its capacity by 20 percent and raise fares by 20 percent to become stable.

United, the No. 2 US airline, has been battered along with the rest of the industry by soaring fuel prices. UAL lost $537 million in the first quarter and has been in merger talks with rivals in an effort to offset its fuel bill. UAL recently ended merger talks with US Airways Group, saying it would not seek a merger now.