United looks to lighten load for takeoff

CHICAGO — Pillows and blankets will stay. More corporate and administrative costs will go. Airport operations will be redesigned to become more cost-efficient.

Moving toward the exit sign in bankruptcy, United Airlines is looking for more non-labor savings after effectively completing work force-related cuts totaling a staggering $3.8 billion annually over the past two years.

“In every area of our work where we are not yet competitive, we’ll continue to lower expenses and improve productivity,” CEO Glenn Tilton told employees last week.

After 30 months in bankruptcy, the nation’s second-largest airline says it hopes to emerge from Chapter 11 this fall. That target became more reachable Tuesday when United gained contract agreements with its last two holdout unions, representing a combined 27,000 mechanics, ramp workers and other ground workers.

But the carrier, a unit of Elk Grove Village, Ill.-based UAL Corp., still has important unfinished business before it nails down the needed $2 billion to $2.5 billion from banks in exit financing.

Heading the to-do list is resolving a costly standoff over airplane leases. United’s initial goal of slicing $900 million a year off its plane rental costs was dealt a major blow last month when it lost a risky court bid to have the leasing companies declared an illegal cartel, giving them the upper hand in negotiations.

Non-labor cuts also have been substantial in bankruptcy, however, at an estimated $3.2 billion a year. Included among the cost cuts, some of which were detailed in a recent bankruptcy court filing:

• Smaller, simpler fleet. By rejecting many leases, United has simplified its fleet to five aircraft types from 10 and reduced its size to 455 aircraft from 565. Capacity is down 18 percent since 2002.

• Fuel conservation. Pilots and dispatchers have been trained in fuel efficiency techniques such as shutting down engines immediately on arrival at gates and flying more direct polar routes, saving a projected $50 million in 2005.

• United Express. Flying fewer and smaller planes at lower rates than it paid previously to its regional partners has cut annual costs by $300 million at United Express, whose flights are operated by small carriers under the United name.