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posted: 11/19/2013 4:57 PM

United aims for $2 billion in cost savings

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  • ASSOCIATED PRESSUnited Continental Holdings stock climbed to the highest price since 2008 after the world's biggest airline said it would cut $2 billion in annual spending and boost profit.

      ASSOCIATED PRESSUnited Continental Holdings stock climbed to the highest price since 2008 after the world's biggest airline said it would cut $2 billion in annual spending and boost profit.

 
Associated Press

Chicago-based United Airlines said Tuesday that it will cut costs, overhaul its website, and shift flying from Asia to Europe as it aims to keep shareholders happy.

United didn't announce any furloughs as part of the cost-cutting measures outlined on Tuesday in a presentation to investors. A spokeswoman declined to comment on whether its plans include furloughs.

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United says it is aiming to burn less fuel, make workers more productive, and improve its maintenance processes. It has been working with its mechanics' union to revamp which maintenance jobs are done by the 2,000 workers at its San Francisco maintenance center, said Greg Hart, who runs the airline's technical operations.

United said it will overhaul its United.com website in phases starting next year.

The airline has been struggling to run smoothly and produce consistent profits since merging with Continental in 2010.

"In many ways it's felt like we've been managing a merger and not an airline," Chairman and CEO Jeff Smisek said. He added that "behind the scenes we've been laying the foundation for significant earnings improvement, and consistent earnings."

S&P Capital IQ analyst Jim Corridore wrote in a note that he's "very positive" on United's goals, but the airline hasn't consistently executed its plans. "We would like to see some traction on these plans," he wrote.

One of United's goals is to boost the revenue it gets from add-ons such as meals, baggage, and admission to its lounges by $700 million, to $3.5 billion in 2017. It didn't lay out specific new fees or plans in this area, but executives said options include bundling together fees. United already has several like that, such as $349 for a "subscription" for a year's worth of checked baggage.

United is also adjusting where it flies. In March it will stop flying between Seattle and Tokyo under intense pressure from Delta Air Lines Inc. United will instead add a second daily flight to Tokyo from its biggest hub, Houston.

United partner All Nippon Airways still flies Seattle-Tokyo.

Delta is United's archrival on Asia flying. It has two daily flights from Seattle to Tokyo, including a recently-added flight to Haneda airport, which is popular with business travelers because it is closer to Tokyo's downtown.

United is also dropping some flights within Asia, including Tokyo-to-Bangkok, and using a smaller plane for Tokyo-to-Seoul. It will still connect passengers on those routes through partner ANA.

Those planes that had been used in Asia will be shifted to new flights from Houston to Munich, and new seasonal flying from Washington to Madrid and Chicago to Edinburgh, Scotland.

United expects to boost overall 2014 flying capacity by 1 percent to 2 percent.

Investors have been watching for United to catch up with Delta in providing reliable profits.

Delta posted a 2012 profit, while United lost money. Analysts expect Delta to post a fourth-quarter profit, while United is expected to break even.

United said it will begin returning cash to shareholders in 2015. The company didn't say how, but returning cash typically involves paying a dividend or buying back shares. Delta reinstated a dividend in September.

Shares of United Continental Holdings Inc. rose $1.33, or 3.7 percent, to $37.71 in afternoon trading. The stock is up 28 percent over the past three months.

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