United Cuts
The good news just keeps coming and coming:
CHICAGO - United Airlines said Tuesday it plans to remove 15 to 20 older, less fuel-efficient airplanes from its fleet and may reduce capacity in the face of soaring oil prices that could increase its fuel costs by more than $1 billion this year.
In a move reflecting the increasing squeeze on the airline industry, UAL Corp.'s United also said it is looking to reduce other costs and continue passing along the higher fuel expenses to its passengers by charging extra for some products and services.
The nation's second-largest airline already raised round-trip fares by as much as $50 per round trip last week, a move quickly matched by other carriers.
Fuel is United's largest expense, and every $1 increase in the price of a barrel of oil boosts its costs by about $60 million. Oil prices have shot up by about $20 barrel in the last six weeks, raising United's projected 2008 costs by some $1.2 billion.
"We are taking a prudent step now by reducing our fleet, taking assets out of the network that don't make sense at these fuel prices, to better position United to be successful in an ever-challenging environment," Chief Financial Officer Jake Brace said.
Brace was to outline the changes later at a conference for airline industry investors in New York.
CEO Glenn Tilton defended passing the higher costs to customers in a message to employees.
"It is in no one's interest _ not our employees, our investors, and certainly not our customers _ for U.S. network carriers to be so vulnerable to inevitable, as well as unexpected, economic downturns," Tilton said. "U.S. airlines must function like other businesses, making investments and providing service where we can do so profitably."
United shares fell 5 cents to $20.86 in morning trading.
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