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United Cuts Staff, Shrinks Fleet, Reorganizes Management

Wow, what a couple of days it's been for United Airlines. The airline will ground 100 planes, cut about 1,500 salaried and management employees (not to mention the furloughs that must be coming soon), and make some changes in management. Oh, and did I mention Ted is gone? Yeah, it was a big news week for the airline.

The first hint that something was happening came when I had no idea it meant anything. I actually wrote a draft yesterday when I saw that Joe Kolshak, COO of Midwest Airlines, had stepped down. It appeared to happen without notice, so I wondered, "What airlines might be in need of an operations guy?" Sure enough, before I had time to post that, United had announced that he had been hired. It's funny. They didn't even mention his couple month stint at Midwest, only his previous role at Delta. So, Joe will now be the Senior VP of Operations, but oddly he will be based in San Francisco, thousands of miles from the airline's home in Chicago. That seems pretty strange to me, but hey, I'd rather be in San Francisco as well if I had the choice.

But the big news here isn't the now-frequent management shuffle. It's the capacity cuts. In the past, conventional wisdom seemed to say that big, meaningful cuts could only happen via merger, but I think we're proving that wrong these days. United will cut out an incredible 100 aircraft from its fleet. To be fair, 30 of them (the 737-500s) were already announced and have been incorporated into the schedule. The remaining 64 737-300s will now follow with all but 20 gone by the end of the year. With all those 737s disappearing, United had to do something to create fleet flexibility, so Ted will now go away. All those planes will be converted to mainline configuration next year.

From a commonality standpoint, this is great. There were four different types of 737s (Shuttle 737-300, non-Shuttle 737-300, Shuttle 737-500, non-Shuttle 737-500) plus the two different types of A320s (Ted, non-Ted). Now those six different types will be down to just 1 - the non-Ted A320. (Ok, there's overwater-equipped vs not overwater-equipped, but I'm not counting those.) More important than commonality, however, is that the airline will be able to shrink and raise fares.

That's been the mantra around the industry for a long time. There's too much capacity, so we need to take it out. American and United have done their parts. Delta and Northwest have promised not to cut as part of their merger, but I can't believe that. Continental just jumped onboard this morning by announcing that 67 aircraft will leave the fleet. That just leaves US Airways. And yes, it would be nice to see Southwest do it as well, but I think the best we can hope for there is that they just stop growing.

We're in an interesting time where finding start-up capital is going to be difficult if not impossible. That means that these cuts in capacity aren't likely to be replaced by some misguided guy who thinks he has a great idea. This may actually hold for awhile. Fares will go up, and they should. We're seeing the very beginning of the end for widespread low fares, at least until the price of oil comes back down or we find an alternative fuel.

In a time like this, I always feel bad for those people who work for the airlines. There are going to be a lot of layoffs at United right now, and I probably know some of those people from my time there. Unfortunately, I fail to see a better way to do things in a time like this. United, and everyone else, is doing what has to be done for the airlines to survive.

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