United cuts jobs, discount TED
- added June 4, 2008
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UAL Corp.'s United Airlines, the world's second-largest carrier, will shut its low-fare Ted airline, ground 70 planes and cut as many as 1,100 jobs to help counter record fuel costs.
United's second round of cutbacks in two months follows a 76 percent surge in jet fuel prices in the past year that will add $3 billion to its spending for fuel. AMR Corp.'s American Airlines, the world's biggest carrier, and Delta Air Lines Inc. also are paring their domestic seating capacity.
``These are very aggressive domestic capacity and cost cuts,'' Calyon Securities analyst Ray Neidl in New York said in an interview. ``If oil stays at $130 or $120 a barrel, I expect you'll see additional big cuts announced by airlines as we move through the year. Basically, you need over 20 percent of capacity taken out of the domestic market.''
United's reductions will take place this year and next, adding to the 30 planes taken out of service and 500 management job cuts announced in April. Chicago-based United said today in a statement that it's scaling back international flights, which have been profitable. United's main jet fleet has 460 planes.
Airlines' efforts to cover fuel costs with fare increases and new baggage-check fees have fallen short, leading JPMorgan Chase & Co. analyst Jamie Baker to estimate that the U.S. industry's losses will top $7.2 billion this year.
Worst 2008 Performer
UAL gained 42 cents, or 4.9 percent, to $8.95 at 10:26 a.m. New York time in Nasdaq Stock Market composite trading. The company has tumbled 76 percent this year, making it the worst performer among 14 carriers in the Bloomberg U.S. Airlines Index.
``United's move is a necessity in the face of high fuel costs and should significantly improve the company's pricing power and lower costs,'' said Douglas Runte, managing director at RBS Greenwich Capital in Greenwich, Connecticut.
United's second round of cutbacks in two months follows a 76 percent surge in jet fuel prices in the past year that will add $3 billion to its spending for fuel. AMR Corp.'s American Airlines, the world's biggest carrier, and Delta Air Lines Inc. also are paring their domestic seating capacity.
``These are very aggressive domestic capacity and cost cuts,'' Calyon Securities analyst Ray Neidl in New York said in an interview. ``If oil stays at $130 or $120 a barrel, I expect you'll see additional big cuts announced by airlines as we move through the year. Basically, you need over 20 percent of capacity taken out of the domestic market.''
United's reductions will take place this year and next, adding to the 30 planes taken out of service and 500 management job cuts announced in April. Chicago-based United said today in a statement that it's scaling back international flights, which have been profitable. United's main jet fleet has 460 planes.
Airlines' efforts to cover fuel costs with fare increases and new baggage-check fees have fallen short, leading JPMorgan Chase & Co. analyst Jamie Baker to estimate that the U.S. industry's losses will top $7.2 billion this year.
Worst 2008 Performer
UAL gained 42 cents, or 4.9 percent, to $8.95 at 10:26 a.m. New York time in Nasdaq Stock Market composite trading. The company has tumbled 76 percent this year, making it the worst performer among 14 carriers in the Bloomberg U.S. Airlines Index.
``United's move is a necessity in the face of high fuel costs and should significantly improve the company's pricing power and lower costs,'' said Douglas Runte, managing director at RBS Greenwich Capital in Greenwich, Connecticut.
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