United May Ground 737-500s, 767-200s to Cut Fuel Use

(Corrects aircraft type to 737-500 in headline.)

United Continental Holdings Inc. (UAL), the world’s largest carrier, may ground its Boeing Co. (BA) 737-500 and 767-200ER aircraft to cut fuel use amid rising prices.

Getting rid of less fuel efficient planes is among steps the Chicago-based carrier is considering after announcing March 7 that it would pare planned capacity growth this year. The capacity changes won’t require employee layoffs, Chief Executive Officer Jeff Smisek said today.

The price of jet fuel, one of airlines’ largest costs, has risen 27 percent this year, prompting United to join Delta Air Lines Inc. and AMR Corp.’s American Airlines in cutting 2011 growth plans.

“We can’t just hold our heads in our hands and cry and scream,” in reaction to higher fuel prices, Smisek said during a speech at a Houston energy conference today. United, with more than 1,200 aircraft, burns $25,000 in fuel every minute, he said.

The airline has 34 737-500s with an average age of 15 years, and 10 767-200ERs that are an average 9.8 years old. United also is looking at other opportunities to reduce fuel use across its fleet, Smisek said.

United capacity will be unchanged for the full year, down from a previous forecast of 1 percent to 2 percent growth, the company said. Domestic capacity will decline by as much as 2.5 percent, while international will increase as much as 3.5 percent, United said.

The biggest U.S. airlines have raised fares six times this year across their networks. Some carriers, including JetBlue Airways Corp., also have boosted fees for optional goods and services to help offset the higher fuel costs.

United Continental was formed in October in a $3.47 billion merger between United Airlines parent UAL Corp. and Houston- based Continental Airlines. The two airlines will maintain separate flight operations until the parent company receives a single operating certificate from federal regulators.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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