Cuts at United Airlines could wound Bay Area economy

The loss of more than 1,000 jobs and the slashing of domestic flights at United Airlines, the largest carrier at the Bay Area’s busiest airport, could cut deep into the region’s economy and force airfares to spike, economic analysts predicted Wednesday.

United, which employs 9,900 workers at San Francisco International Airport, plans to cut between 900 and 1,100 jobs nationwide by the end of the year. The airline, whichcarries almost half of all passengers traveling through SFO each year, is cutting 17 percent of its domestic flights and removing 70 airplanes from its fleet by the end of the year, as well as 20 more by the end of 2009. International capacity will also be cut by 4 percent to 5 percent.

The cutbacks were the latest among major airlines coping with high fuel prices, which have jumped 70 percent since 2007. Crude oil futures reached a record when they surpassed $135 recently.

“At United, we continue to do the right work to reduce costs and increase revenue to respond to record fuel costs and the challenging economic environment,” said Glenn Tilton, United chairman, president and CEO, in a statement.

According to Tilton’s statement, gas will cost the airline $3 billion more than last year, which the cuts will help leverage.

Slashing jobs will put United flight attendants, pilots and mechanics on the chopping block, said Leslie Miller, from the Teamsters Union representing airline employees.

Although the airline has not said which routes will be affected, any decrease in flights out of SFO will cause a drop in passenger traffic, loss of revenue at the airport and a hike in fares, industry analysts said Wednesday. It will also have a ripple effect on taxis, hotels and travelers in the area, SFO spokesman Mike McCarron said.

Concession sales at SFO, at more than $100 million a year, contribute about 16 percent to the airport’s total revenue.

“This hurts and it’s bad,” said John Grubb of the Bay Area Council, a pro-business nonprofit organization. “This is one of those examples where domestic economy is dragging down the Bay Area.”

Henry Harteveldt, an airline industry analyst with Forrester Research, said United will also likely reduce its service in smaller airports, such as Oakland International and Norman Mineta San Jose International Airport. But McCarron remained optimistic about the future of SFO.

“I believe that SFO has a better chance of seeing more flights remain intact than other hubs because of United’s dominance here, their strong base of frequent flyers, and large base of corporate business accounts,” McCarron said. “We project a 5 percent growth for this year, and we don’t see anything that should slow that down right now.”

svasilyuk@sfexaminer.com

United cutbacks at a glance

What the airline is cutting and who it will affect.

» FEWER FLIGHTS: United Airlines became the latest U.S. carrier to announce big cutbacks in the face of soaring fuel prices Wednesday. The UAL Corp.-owned airline said it will reduce domestic capacity 17 to 18 percent in 2008-09, take another 70 jets out of service, scrap its discount carrier, Ted, and eliminate 1,100 additional jobs, with more to come.

» SMALLEST SUFFER: Travel experts say the reductions will be felt the most in small cities and at regional airports that are losing some or all service as the industry shrinks and smaller and older planes are grounded.

» TOURISM IMPACT: Experts say the higher fares and elimination of flights or routes to popular leisure destinations such as Las Vegas and Orlando, Fla., will hurt hotels and resorts that have prospered in an era of cheaper fares. — AP

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