• Chicago Tribune, Thursday, June 5, 2008 10:30 AM

With the economy in a downdraft, United Airlines is scrapping its coach-only "Ted" service and reconfiguring those planes to include first-class seats. It's also cutting domestic capacity by 17%, and laying off an additional 900 to 1,100 employees by the end of the year, in addition to the 500 employees it already planned to lay off.

International capacity will be scaled back by 4 to 5%.

With crude oil prices up 73% from 2007 levels and global economic growth slowing, international flights no longer are guaranteed moneymakers, analysts say. Airlines are closely studying their global networks, trying to best match routes with aircraft.

Conserving cash and gaining capital are top priorities for most U.S. carriers as a shakeout looms, analysts say. The exception is Southwest Airlines, which is expected to remain profitable because of financial hedges that enable it to pay dramatically less for fuel. Also worrying is a drop in passenger demand that will make it difficult for carriers to raise prices without additional capacity cuts.

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