ATW Daily News

Tilton: United sees silver lining in capacity, payroll cuts

Thursday October 9, 2008

Network carriers based in the US that cut fall and winter capacity as a result of soaring fuel prices may have insulated themselves somewhat from the steepening global economic downturn, United Airlines Chairman, President and CEO Glenn Tilton told ATWOnline.

Speaking in Sao Paulo, where United helped welcome TAM into Star Alliance this week, Tilton said UA's capacity reduction (ATWOnline, July 23), which started last month, "was very timely, largely driven by high oil prices but just before the [current financial] crisis had arrived." He said UA has reduced its fleet by 23% and capacity by 16% and that "some more adjustments could be necessary. We are watching the situation very closely. All airlines are very focused on capacity."

He said it "remains to be seen" whether there will be layoffs in addition to the 7,000 already announced. Yesterday the carrier notified the International Brotherhood of Teamsters that it will lay off 414 San Francisco-based mechanics in December, according to press reports.

Despite the turmoil, UA and its domestic competitors should be safe for the time being, Tilton said. He does not expect any of the large US carriers to slip into bankruptcy. "The airlines removed capacity when the market started to soften and oil prices climbed. We are seeing now more discipline to adjust networks."

UA also will look to take advantage of enhanced joint ventures and its Chicago O'Hare hub. Tilton said he is counting on receiving antitrust immunity approval for a transatlantic alliance comprising UA, Lufthansa, Air Canada and Continental Airlines (ATWOnline, July 24), while Chicago's role as an export rather than financial center may help the carrier maintain its premium traffic. "From the Chicago market we see industrial and commercial travelers. Chicago has an export industry which continues to grow. Our hubs are different" from competing airlines', he said.

Meanwhile, cash flow is "substantial" and the strengthening dollar, as well as strong load factors to Latin America and the Pacific, will help. He said UA saw no sign of a significant drop in passengers during the current quarter, although there is "some softening" in forward bookings for 2009.

by Kurt Hofmann

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