United plans job cuts after $500M loss

April 22, 2008 4:16:14 PM PDT
The stock of United Airlines took a nosedive Tuesday after the company reported a loss of more than a half billion dollars.The deficit will also mean job cuts and, most likely, fare hikes.

If fuel costs had gone up only modestly, United would have shown a nice profit in the first quarter. But fuel costs keep setting new records, and they have burned United $537 million into the red.

With the immediate future promising little relief for the airline industry, United's CEO says "fundamental overhauls" are necessary, and that'll mean job cuts.

United earlier this month had already started laying off some of its newly hired customer service reps. They are victims of high fuel costs. And now, United says, there will be more cuts and they will go much deeper.

Five hundred jobs will be cut from management ranks, along with 600 union jobs. United, for now, will not specify what those jobs are, but said the reductions will take place over the rest of this year.

United is also cutting its domestic flight capacity. It had earlier said it would be retiring 15 to 20 of its jets. That number is now 30.

United CEO Glenn Tilton, a proponent of airline consolidation, said that the squeeze being felt by the industry represents "a wake up call that the pace of change must accelerate."

The chief executive at Delta says domestic airlines will need to raise fares by 15 - 20-percent just to keep pace with the increase in fuel costs. Delta wants to merge with Northwest, and Northwest's top executive said that cost-cutting measures have been largely exhausted.

The CEOs from Delta and Northwest are in Washington preparing to testify Thursday before congressional committees holding hearings on the proposed Delta-Northwest merger. Both of those airlines will report their first quarter losses Wednesday.

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