UAL trims jet orders for 3 years Airline's deferrals blamed on recession


NEW YORK -- In the face of persistent recession, United Airlines took a big step back from an ambitious expansion strategy yesterday, announcing that it was cutting its capital spending by $6.7 billion over the next three years and postponing the delivery of new aircraft.

The airline, one of the nation's strongest, had sought to keep its expansion drive going in spite of hard times, but continuing poor traffic and heavy fare discounting forced it to pull back.

Both business and leisure travel have been low, showing only a small recovery from the disastrous levels of last year, when fear of terrorists during the Persian Gulf war caused many companies to eliminate international travel altogether and other travelers to stay close to home.

The airline said it was putting off the delivery of 44 Boeing 737s and 60 Boeing 757s.

The news pushed the stock of Boeing Co. down $1.375, to $48, in trading on the New York Stock Exchange. UAL Corp., United's parent company, slipped 87.5 cents, to $144.25.

The move by United, which operates seven flights a day out of Baltimore-Washington International Airport -- five to Chicago and two to Denver -- will bring a drop in capital spending by about 35 percent, to $12.2 billion.

It could also force Boeing to make further cuts in its production schedules. The Seattle-based airplane maker's huge backlog of orders has enabled it to ride out the recession largely unscathed so far, but it recently announced that it was cutting production of the 737 to 14 a month, from 21.

Both Stephen M. Wolf, UAL's chairman, and Robert L. Crandall, the chairman of American Airlines, had been strong believers in keeping firm to expansion plans during downturns, on the theory that such moves put a company in a good position to gain market share in a recovery.

But the last year has been a brutal one for the industry. American announced it was cutting its capital expansion by $8 billion and stretching out the delivery of many of its new aircraft. Two carriers, Pan Am and Midway, have been forced to liquidate while two others, TWA and America West, have filed for bankruptcy protection from creditors.

And at the end of January, United reported a loss of $252.6 million for the fourth quarter, compared with a loss of $123.5 million in the fourth quarter last year.

"Finally airlines have gotten religion about living within their means," said Rose Ann Tortora, an airline analyst for County NatWest. "They are going to pay a little more of their own way." During the 1980s, the airline industry borrowed billions to pay for huge new airplane orders.

T. Craig Martin, a spokesman for Boeing Commercial Airplane Group, said that no United order or options "have been canceled." He said that both United and Boeing had agreed to have orders and options put off to later years.

United said it would take delivery of 156 airplanes from 1993 through 1995, 122 fewer than originally planned. It added that it would take delivery of the 66 aircraft it was committed to in 1992.

It will also continue to take delivery of wide-bodied aircraft, since it has acquired major new routes to Europe and Latin America.

Copyright © 2021, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad