United to Drop Cleveland Hub as $2 Billion in Savings Sought

United to Drop Cleveland Hub as $2 Billion in Savings Sought

[Business Week]

In this Saturday, Dec. 21, 2013, file photo, holiday travelers check in at the United Airlines ticket counter at Terminal 1 in O'Hare International Airport in Chicago. United Airlines reports quarterly earnings on Thursday, Jan. 23, 2014. (AP Photo/Nam Y. Huh)
In this Saturday, Dec. 21, 2013, file photo, holiday travelers check in at the United Airlines ticket counter at Terminal 1 in O’Hare International Airport in Chicago. United Airlines reports quarterly earnings on Thursday, Jan. 23, 2014. (AP Photo/Nam Y. Huh)

United Continental Holdings Inc. (UAL:US), the world’s second-biggest airline, is dropping Cleveland as a hub for connecting flights and cutting 470 jobs as the carrier works to cut $2 billion in annual costs by 2017.

Average daily departures will shrink about 60 percent by June as United eliminates most regional flights at an airport where United has been losing money, Chief Executive Officer Jeff Smisek said in a Feb. 1 letter to employees. Only one of 26 peak-day departures on mainline jets will be halted, he said.

“Given Cleveland’s regional focus we are not shocked to see this significant reduction in flying,” Helane Becker, a Cowen & Co. analyst in New York, wrote in a note today. “We view this move as a positive one for United as there has been a continued shift from smaller aircraft with numerous frequencies to larger aircraft with less frequency.”

United set its savings goal in November as the Chicago-based carrier continues to struggle to control costs since its merger with Continental Airlines in 2010. Larger planes let airlines spread their operations expenses across more seats, while also generating more revenue.

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