United Says Job Cuts Will Be Necessary

[skibeagle]

Business/Finance News
09/01/2004 11:55:25 EST United Says Job Cuts Will Be Necessary



CHICAGO - United Airlines said Wednesday that further job cuts will be necessary as it continues slashing costs in order to get out of bankruptcy.
The nation's No. 2 airline declined to confirm or deny a published report that it is considering eliminating 6,000 jobs, about 10 percent of its work force, saying its business plan remains under revision and no final decisions have been made.

United spokeswoman Jean Medina said the carrier is in "productive" discussions with its board of directors, creditors committee, labor leaders and other key stakeholders, and said job cuts will be part of the overhauled business plan.

"We've said consistently we're moving forward on a wide range of cost-reduction initiatives and we've set some initial cost-saving targets in a number of areas," she said.

"It is clear that achieving cost competitiveness will require additional job reductions over time. But the details of how we achieve the savings we need and the potential impact on our work force are still under discussion, so it would be premature for me to comment on specifics," Medina said.

The Financial Times of London, citing unidentified sources, said the possible 6,000 job cuts would be phased in over time as part of productivity changes and further outsourcing. The report said CEO Glenn Tilton is to submit the revised business plan to the board by the end of this month.

United has about 62,000 employees, down from 100,000 before the 2001 terrorist attacks.

[Farrell]

Maybe it's to help pay for the new cockpit security 'fences'

[skibeagle]

United's plan for profit looks abroad
By Marilyn Adams, USA TODAY
United Airlines said Wednesday that it plans to exit bankruptcy court as a smaller airline but with the largest international service of any U.S. carrier.
United has been in bankruptcy reorganization 22 months and is still posting losses. The airline plans to expand international flying capacity 14% and shrink domestic capacity 12% by next year, without dropping service to any cities.

United and Northwest Airlines are roughly equal in their international business and lead the industry.

International routes have little or no discount competition and are more profitable than domestic routes. In the USA, United confronts Southwest Airlines, Frontier Airways, Independence Air and other low-cost carriers.

In an interview, United executive John Tague said that relentlessly high fuel prices, growing competition from discount airlines and stagnant fares prompted the decision to shrink the domestic system.

In its plan to become profitable, United would reduce its main jet fleet to 455 jets from 523. Rather than drop service to U.S. cities, United will use smaller jets, shift flights to regional carriers or offer fewer daily flights. Tague said executives can't justify keeping so many planes on unprofitable domestic routes.

By the end of 2005, United expects to derive 55% of revenue from international flights to Europe, Asia and South America, up from 46% now.

Washington-based aviation consultant Jon Ash said expanding internationally makes sense for United, which already has a strong route system to three continents on which it can charge premium fares. Most international growth would come in Asia, where United is doubling its flying to China, expanding service in Japan and gearing up for Vietnam.

The shift to international flights and the planned fleet reduction is the biggest piece of United's business plan announced to date.

United needs to complete a revised business plan before getting commitments for financing to exit bankruptcy protection.

The No. 2 airline said it will implement changes between now and March. Chicago-based United hopes to emerge from bankruptcy protection by next June.

But much remains to be done before United can exit bankruptcy court, including reducing its pension obligations.

It has said it probably will terminate its costly employee pension plans and replace them with less expensive plans. But none of the carrier's four employee unions says it has received pension proposals or held formal talks.

Upset with how the company is being run, the International Association of Machinists, United's biggest union, has asked the bankruptcy court to remove United's management team and appoint a trustee to run the company. A hearing is scheduled Oct. 27.

In a letter this week, pilots union Chairman Mark Bathurst told members the union won't accept a replacement plan that isn't structured to recognize that pilots have the most to lose if their plan is terminated.

[MarkD]

Seems they are taking a leaf from AC's playbook - let's see if it works...