United, US Airways making more cuts

JetBlue to defer aircraft deliveries

July 23, 2008|By New York Times News Service

United Airlines and US Airways said yesterday that they would cut even more deeply into their flying during the fourth quarter, while JetBlue Airways said it would defer more aircraft deliveries, steps the carriers blamed on record prices for jet fuel.

All three airlines reported losses in the second quarter compared with profits in the period a year ago.

They joined other big airlines, including American, Continental and Delta, in posting second-quarter losses in the past week. Northwest Airlines is to report its results today. Domestic airlines have been hit hard by record fuel prices, which are up 93.7 percent in North America compared with a year ago. The airlines have cut flights, grounded planes, raised prices and imposed fees for features that used to be free, like checking bags.

United, the second-biggest domestic carrier behind American, said yesterday that it would cut its capacity by 11 percent in the fourth quarter, including a 16 percent cut in domestic flying, and a 7 percent reduction in international flights.

For the full year, United's capacity is expected to drop 7.5 percent to 8.5 percent compared with 2007.

The company's chief operating officer, John P. Tague, said United was seeing a "developing overcapacity in the international marketplace." United recently announced that it was grounding some Boeing 747 jets and dropping several international routes.

The drop in overseas flights is a potentially troubling sign for the major airlines, which traditionally make more money on tickets for trips outside the United States.

But with the price of jet fuel nearly double what the airlines paid in 2007, "the economics of many routes just don't make sense," Tague said during a conference call.

The airline, based in Chicago, said it would also eliminate 7,000 jobs by the end of the year, as it reported a net loss of $2.73 billion, compared with a profit of $274 million in the second quarter a year ago.

JetBlue reported a net loss of $7 million, less than analysts expected. It earned $21 million a year ago.

JetBlue said it had reached an agreement with the Brazilian aircraft maker Embraer to defer deliveries of nine more EMB 190 regional jets, which were a crucial tool in JetBlue's rapid expansion in the past few years.

In all, JetBlue has announced plans to push back deliveries of 10 Embraer planes and 21 Airbus jets this year.

The airline is pulling back sharply on its growth plans, Chief Executive Officer David Barger said in a conference call. Back in 2006, the airline expected to buy or lease 53 more planes than it now expects to add to its fleet.

JetBlue announced yesterday that it would stop flying to Ontario, Calif., the first city it served on the West Coast when it began operations in 2000. The decision to cut Ontario flights is part of a broader decision by the airline to reduce its transcontinental flights.

Last year, transcontinental service accounted for 45 percent of JetBlue's available seat miles. This year, only 30 percent of its seat miles are between the coasts. Instead, the airline is concentrating more on north-south flights and stepping up service to the Caribbean.

As with United, Barger said high fuel prices made some routes uneconomical. When JetBlue began service to Ontario, oil was $30 a barrel. "There are many routes that make sense at $20, $30 or $60 a barrel, but not at $100 and plus," Barger said.

US Airways, which lost $567 million in the second quarter, including noncash charges, also said it was cutting back again on its flights. It said it would cut flights by 4 percent this year, up 1 percent from its previous announcement, and by 6 percent in 2009, up 2 percent.

Most of US Airways' cuts are coming in the United States, where it does the majority of its flying. US Airways, which earned $283 million in the 2007 quarter, said it would cut international flights by 1 percent to 3 percent.

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