United layoffs' effect on fliers

About two weeks after agreeing to spend millions of dollars on naming rights at Soldier Field's Cadillac Club, United Airlines said Tuesday it would eliminate 1,100 jobs after posting a first-quarter loss of $537 million.

Was it those sponsorships and promotions that pushed United's profits into a nosedive? No, it was soaring fuel prices, company officials say. And, with oil prices hitting a record $119 a barrel this week, experts are beginning to wonder when United customers will feel the effects.

Airline analyst Mike Boyd said Tuesday it's coming soon. The cuts endanger the favored routes and good customer service that have been the airline's signature, he said.

"What's missed in all of this is that United has outstanding customer service," said Boyd, principal at The Boyd Group in Evergreen, Colo. "Cutting too much could threaten this. The human factor is United's top asset."

Other industry experts weren't worried.

"There will be no impact on customer service," said Robert J. Gordon, Stanley G. Harris Professor in the Social Sciences, Department of Economics at Northwestern University.

Gordon said the jobs being eliminated amount to 2 percent of United's work force.

"With a reduction in domestic capacity of 9 percent year-over-year, there would be a need for 9 percent fewer employees. With 2 percent fewer employees, instead of 9 percent fewer, customer service should improve as there will be more employees per passenger."

The company could not say Tuesday how the cuts would affect the number of local workers or routes.

"We are reducing capacity, and as we do that, we must reduce the size of the operation as well," said United spokeswoman Jean Medina. "We expect reductions to occur throughout the organization."

The Association of Flight Attendants wasn't surprised by the cutbacks, said union spokeswoman Sara Nelson.

"This is nothing new for the flight attendants, since United has already announced that it stopped hiring," said Nelson.

Along with the staff reduction, some routes or connecting flights could be affected, industry analysts said.

"Forget routes," said Boyd. "It will mainly be in reduced frequencies and to some degree smaller mainline aircraft. But one area that will be cut up like a birthday cake will be the flying done by their regional partners, which are not regional but just companies that lease small jets to United, who schedules them in large markets and small ones, too, like any other airplanes they lease."

The capacity reduction could be only in the domestic operation. International capacity could continue to grow but at a slower rate than over the past year, when there has been growth of 18 percent in the Atlantic division and about 5 percent in the Pacific division, Gordon said.

"Capacity reductions will be accomplished primarily by reducing frequencies on existing routes," Gordon said. "I expect that few routes will be cut. Because the 30 grounded planes will mainly be Boeing 737-500 aircraft, the smallest in the system with 104 seats, there will be some shifting of existing Boeing 737-500 routes to regional affiliates flying regional jets."

For instance, the route from O'Hare International Airport to Jacksonville, Fla., this year was upgraded to 737 service from regional jet service, and next year it could be downgraded back to regional jet service, Gordon said.

"Customers are accustomed to flying regional jets on shorter routes. On longer routes, five frequencies per day may be reduced to four, or four to three," said Gordon. "You don't have to do much of that to achieve a 9 percent capacity reduction."

Since United emerged from bankruptcy about three years ago, the company said it needed a new strategy. So it continued to streamline in some areas and boosted others, such as getting the naming rights at the new United Club at Soldier Field in a multi-year agreement.

"But the financial results (on Tuesday) point to needing new leadership at the top," Boyd said. "A $542 million (pre-tax) loss, just months after Tilton lavished $250 million on shareholders. Something's really out of whack in those front offices."