"Change clearly needs to be made, and it's going to have to come across a host of areas," said Kathryn Mikells, United's vice president for investor relations, who declined to discuss its negotiations with US Airways or Continental. "There isn't a single silver bullet."
None of the major American carriers are expected to earn a profit in 2008, except Southwest Airlines, which is expected to benefit from costly hedges against rising fuel costs.
United, American and Northwest airlines have all renegotiated covenants that would likely cause them to default on loans this year if cash flows continue to decline. United also renegotiated an agreement with its largest credit-card processor.
Even Southwest mortgaged 21 aircraft to raise $600 million in cash last week, bolstering the $3 billion it has on reserve. Southwest spokeswoman Brandy King said the Texas-based discounter decided to "take advantage of attractive financing" and said the cash would go to "general corporate use."
While Southwest adds to its network, every other major airline is planning big cuts in flying after the busy summer travel season. United already has identified 52 flights that will be cut and is studying its network for others as it plans to ground at least 30 planes and trim its domestic network by 9 percent during the fourth quarter. It could reduce flying further if fuel costs continue to rise, Mikells said.
The nation's second-largest carrier is looking at a host of other ways to trim costs and raise revenues. Those initiatives are being coordinated by a council of senior leaders established to streamline planning.
As of July 1, United will end a long-standing policy of awarding at least 500 frequent-flier miles to its Mileage Plus members, no matter how short the flight. And earlier this month, it started charging passengers $25 to check a second bag, a policy other airlines also have adopted.
If oil prices don't drop, financial pressures will grow for airlines as the year progresses, analysts predict.
"There is probably no more challenging time for them since Sept. 11 in terms of running their business," said Forrester's Harteveldt.
Julie Johnsson writes for the Chicago Tribune.
Survey
Flier satisfaction at lowest level in years. 3D
