United to cut 1000 more jobs. Will airlines continue to shrink, and then merge?

George Hobica, January 21, 2009
Fares from Washington DC:

    United Airlines lost $1.3 billion in the last quarter, and announced 1000 further salaried and mangement job cuts in addition to the 2500 job losses announced in Q2 2008. In additon, the nation's third largest carrier (after American and Delta) will further downsize, parking aircraft and reducing seat capacity. Airline ticket purchases continue to decline, despite some really amazingly low fares, as the economy deteriorates.

    Some industry watchers suggest that further downsizing and consolidation is inevitable. One thing that's preventing future consolidation is that the remaining players are still too big to get government approval for a merger (e.g., if United and US Air were to combine at their present sizes, the new entity would have too large a market share to suit antitrust regulators and Congress). But what if those carriers continue to cut personnel, seat capacity, and routes? Then they' might "right size" to the point where a merger would be possible. Anyway, that's the thinking of some in the industry. No predictions here about whether that will come to pass.

    But airline shrinkage is a fact of life. American Airlines also reported dismal financial results for the quarter just ended, with a $340 million loss. American plans to cut total seats flown by 7 percent this year compared to last, while United plans to eliminate up to 12.5 percent of capacity in North America in 2009 and 5 to 6 percent internationally, for a total full year reduction systemwide of 7 to 8 percent.

    Comments