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United Cuts Orders, May Give Up Routes

March 20, 1993|From Associated Press

CHICAGO — Struggling United Airlines has indicated it will cancel or delay delivery of at least 29 Boeing aircraft and is considering additional cost-cutting moves, including possibly turning over some routes to other airlines.

"There are parts of our business that we could have someone else do for us more inexpensively than we can do it," Chairman Stephen Wolf said.

Wolf said this week that the company has concluded negotiations with Boeing on aircraft order reductions.

He refused to comment on the deal pending completion of similar discussions with aircraft engine makers, but told a meeting of securities analysts on Thursday that reductions in plane deliveries will be "slightly larger" than many analysts have expected.

United President John Pope told the analysts that the airline will stop taking new Boeing aircraft deliveries at the end of this summer and will take no more until May, 1995, when Boeing begins shipping its first 777s.

That means the airline will cancel or postpone the 29 Boeing aircraft--21 737s, three 747s and five 767s--it previously had ordered for delivery in 1994.

United also has 50 Boeing aircraft scheduled for delivery this year and 17 in 1995.

Eleven of the 1995 orders are for 777s.

Those cuts would fall within Boeing Corp.'s previously announced expectations for United order postponements.

Airline analysts said the moves come as no surprise.

"United has made it very clear their intention is to defer or cancel the vast majority of their Boeing deliveries over the next several years, excluding the 777," said Samuel Buttrick of Kidder Peabody & Co. in New York.

Overall, United has a total of 175 aircraft on order from Boeing and options to buy another 258 from the Seattle-based manufacturer.

Wolf said United will continue to take delivery of the Airbus A320, a European-built jet. United has 50 Airbuses on firm order, beginning with five this year, and has options to buy 50 more.

But the airline might lease the Airbuses to other carriers and perhaps have them fly United domestic routes that deliver passengers to United hubs in larger cities such as Chicago, Denver and Los Angeles.

If operating such feeder routes no longer makes economic sense, "we might have to get some other airline to do it for us," Wolf said.

The Airline Flight Attendants Assn. would fight such a move, said Diane Tucker, president of the union's United chapter.

"If he tries to move any of the existing flying to other carriers, it does violate the contract, and we will exercise every option available to us to protect our work force," she said.

Major airlines have been hemorrhaging money because of costly fare wars. Wolf refused to say whether United could turn a profit this year.

The airline lost $957 million last year, nearly triple its 1991 loss.

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