United Airlines reduces domestic capacity, focuses on revenue performance

UAL Corporation has reduced 2007 mainline domestic capacity growth by two percent from previously planned levels. (5/21/2007)This reduction in domestic capacity enables the company to meet increasing international demand and optimise its revenue performance. On a system basis, the domestic capacity reduction will be partially offset by an increase in international capacity of approximately 0.5 percent. In the fall, United will add service between Los Angeles and Hong Kong and between Washington D.C., and Rio De Janeiro, Brazil. Consolidated system capacity will be reduced approximately 0.5 percent from previous expectations. “Given the domestic market’s slow revenue growth and excess capacity, we believe that removing marginal domestic capacity is the appropriate response,” said John Tague, Executive VP and Chief Revenue Officer. “Some capacity will move internationally to meet the service needs of our customers and extend United’s market-leading position at Los Angeles International and Washington-Dulles airports.” Due to the planned capacity reduction, the company is also updating the cost guidance it provided in its 2007 first quarter earnings release. The company now estimates that mainline operating cost per available seat mile (CASM) excluding fuel, severance and special items will increase by about one percent for the second quarter of 2007 and for the full year 2007 will increase by 1.5 to 2 percent versus the comparable periods in 2006. Despite the reduction in available seat miles, full-year CASM excluding fuel guidance remains largely unchanged reflecting the companys execution of its performance agenda.

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