Source: MarketWatch

CHICAGO (MarketWatch) -- UAL Corp., parent company of United Airlines, plans to cut at least 1,000 salaried and management positions by the end of the year, part of a redoubled cost-savings effort, the company's chief executive said Wednesday.

Glenn Tilton, chairman, president and CEO at UAL, told investors at Merrill Lynch's Global Transportation Conference in New York that the job cuts are part of a plan to reduce spending on general and administrative overhead by about $100 million.

"As a part of that initiative, we'll be eliminating at least 1,000 salaried and management positions, out of approximately 9,400, by year-end," Tilton said.

UAL, which emerged from three years of bankruptcy protection in February, previously said management ranks at the company could be reduced, but the airline hadn't specified a number. UAL has 57,000 employees overall, down from 80,000 when it filed for Chapter 11 bankruptcy protection.

Tilton said United's cost performance is competitive with that of its industry peers, but that further improvement is possible. "As we near the end of the second quarter, our cost performance is somewhat better than the guidance we provided during the first-quarter conference call," Tilton said during a presentation that was transmitted over the Internet. "Our continuous improvements initiatives...are going to reduce our costs further by some $400 million."

UAL cut $7 billion in costs as part of the bankruptcy restructuring process. Last month, following the release of its first-quarter earnings statement, the company said it planned to cut $300 million in costs this year and another $400 million next year.

During his presentation Wednesday, Tilton didn't specify a time frame for the further $400 million in cost cuts. Jean Medina, spokeswoman for United, said Tilton was referring to the 2007 cost savings. About half of the overall cost cuts cited by Tilton, or roughly $200 million, will come through reductions in expenditures on purchase services. The company also plans to cut advertising and marketing costs by about $60 million and escalate its cost-of-sale reduction program, Tilton said.

UAL shares were recently up 0.9% at $27.28 on moderate trading volume of about 987,450 shares. The stock is near the low end of the $26.02-$43 range it has traded in since being launched earlier this year. Tilton said the relatively weak performance of the stock - UAL shares are down about 30% over the past two months - is partly attributable to the company's cost performance in the first quarter.

UAL's cost per available seat mile, or CASM, an industry standard for cost measurement, rose 11% in the first three months of the year. Excluding fuel, CASM was up 3% in the period. Tilton noted that CASM currently stands at 7.52 cents and that "the second quarter shows progress" in improving that performance.

Tilton said many investors are going to be watching earnings reports for the second and third quarters to serve as a "proof point" for the turnaround story that the company is laying out. He said United has done restructuring work that other airlines haven't in recent years, which he expects will provide more sustainable benefits to investors.

Tilton said that, despite high fuel prices, UAL's cash flow is "very strong" and growing to beyond $4 billion, after a $400 million increase in the first quarter. He also pointed to the company's restructured balance sheet, minimal capital-expenditure requirements and limited debt obligations as solid building blocks for the company. Having laid that groundwork, Tilton said the company is focused on improving United's core business by optimizing revenue, becoming more efficient, refining its route structure and enhancing services to customers.

He said revenue at the airline is competitive but "can and will improve."

In the first quarter, United's revenue was $4.47 billion, up 14% from the year-earlier quarter. The carrier posted a net loss for the period, excluding gains related to bankruptcy restructuring, of $306 million. That compared with a net loss of $302 million, excluding reorganization items, a year earlier.