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United Under Pressure

United Airlines to shutter low-fare airline, cut jobs

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Jun 04, 2008

DETROIT - United Airlines said Wednesday that it would discontinue its low-fare airline, called Ted, retire aircraft and cut as many as 1,100 additional jobs in an effort to lessen the impact of high jet fuel prices.

The announcement had been expected for several weeks, ever since the airline surprised Wall Street with a $537 million loss for the first quarter.

The steps came a week after the airline put merger talks with US Airways on hold, and about five weeks after the board at Continental Airlines decided not to proceed with alliance talks it was holding with United.

United's measures come on the heels of similar cuts at a series of other airlines, which are struggling to combat an 82.5 percent increase in jet fuel prices compared with last year.

United said flights by its Ted unit would end, although it did not give a date when that would happen. It said the Airbus A320 aircraft used to carry passengers on Ted would be incorporated back into its main fleet.

United, a unit of the UAL Corp., will also retire 100 aircraft, including all 94 of its Boeing 737 midrange jets, assuming the airline can reach agreements with aircraft leasing companies.

The number includes 30 planes whose retirement had already been announced. In addition, United said it was retiring six Boeing 747-400 series jets that are used on long flights, like those overseas and to Hawaii.

The steps will reduce the average age of United's fleet to 11.8 years from 13 years, and reduce its overall capacity by 17 percent through 2009. United said 80 planes would leave its fleet by the end of this year, while the remaining 20 would be retired in 2009.

Also, United said it expected to cut up to 1,600 jobs, including 500 that had already been announced.

United's actions are intended to "enable us to compete more effectively - and ultimately more profitably - in this environment," its chief executive, Glenn Tilton, told employees.

United started Ted in February 2004 as an effort to compete against low-fare airlines.

Ted, and Song, a now-defunct unit of Delta Air Lines, were started by their parents in response to market share gains by JetBlue, Frontier, AirTran and other low-fare carriers.

Ted flew to 20 destinations across the United States and Mexico, and had its main base in Denver. Its Airbus jets are among the youngest in United's fleet.

The creation of Ted was announced as one of the steps taken by United while under Chapter 11 bankruptcy.

United Airlines to shutter low-fare airline, cut jobs
Paul Sakuma/The Associated Press

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