Significant Aircraft, Capacity and Workforce Reductions at United Airlines

United Airlines has confirmed it is to make significant fleet, capacity and personnel reductions. The move follows similar actions from other airlines, such as Qantas and American Airlines, and should help the airline build a stronger, more competitive business model which is better able to withstand record oil prices and a softening economy.

United will remove a total of 100 aircraft from its mainline fleet, including the 30 previously announced Boeing 737s, and reduce its mainline domestic capacity in the fourth quarter 2008 by 14% year over year. The company expects to retire all of its 94 Boeing 737s, provided it can work out terms with certain lessors, and six Boeing 747s. Over the 2008 and 2009 period, cumulative mainline domestic capacity will be reduced between 17% and 18% and cumulative consolidated capacity between 9% and 10%.

“Today we are taking additional, aggressive steps that demonstrate our commitment to size our business appropriately to reflect the current market reality, leverage capacity discipline to pass commodity costs on to customers, develop new revenue streams and continue to reduce non-fuel costs and capital expenditures,” said Glenn Tilton, United’s chairman, president and CEO. “This environment demands that we and the industry act decisively and responsibly. At United, we continue to do the right work to reduce costs and increase revenue to respond to record fuel costs and the challenging economic environment.”

With fuel at current prices, it creates more than a $3 billion challenge to overcome. United believes that these actions will offset that challenge by 2009, assuming the industry as a whole takes similar actions.

When complete, the fleet reduction is expected to retire United’s oldest and least fuel-efficient jets, and will lower the company’s average fleet age to 11.8 years. The majority of schedule changes related to the elimination of 30 Boeing 737s previously announced are currently reflected in reservation systems. Further changes related to the retirement of an additional 50 aircraft by year end will be reflected in these systems in the near future. Schedule changes will be principally accommodated through modest reductions of underperforming markets and through frequency reductions while retaining a commitment to all five U.S. hubs. About 80 planes are expected to be out of the system by the end of 2008, with the other 20 coming out by the end of 2009. The fleet reduction also includes six Boeing 747s. As part of these changes, United is eliminating its Ted product, reconfiguring that fleet’s 56 A320s to include United First class seats. The reconfiguration of the Ted aircraft  will begin in spring 2009 and be completed by year-end 2009.

“The decision to dramatically reduce our capacity profile, particularly in the domestic marketplace, while over time eliminating a fleet type, is a significant step leading to a more effective and efficient operating fleet for United in the years ahead, while improving our customer experience and reliability,” said John Tague, executive vice president and chief operating officer.

As United reduces the size of its operation, it is further reducing staff. United expects to reduce the number of salaried and management employees and contractors by 1,400-1,600, including the previously announced 500 employee reduction by year-end, and the company is expected to determine the number of front-line employee furloughs as it finalizes the schedule over the next month.

The company has also named Joe Kolshak senior vice president of operations, overseeing United Services, Flight Operations and Operations Control. Kolshak previously served as Delta’s executive vice president of operations, responsible for Delta’s maintenance, flight operations, ground operations, operations control, safety and security as well as the Delta Express operations. He will be based in San Francisco, and will report to Tague.

Alexandria Marren has also been promoted to senior vice president – Onboard Service, and will also oversee flight attendant scheduling. She previously served as vice president – Onboard Service. Marren will report to Tague. William Yantiss, vice president – Corporate Safety, Security and Environment, will report to Tague.

Cindy Szadokierski, who has been responsible for Operations Control, will now be vice president of United Express and Airport Operations Planning, reporting to Scott Dolan, senior vice president – Airport Operations, Cargo and United Express. As a result of the reorganization, the company also announced that Bill Norman, senior vice president – United Services, and Sean Donohue, senior vice president – Flight Operations and Onboard Service, will be leaving United.

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