United Airlines 'may perish'

United Airlines is expected to lose $1bn this year

Shares in United Airlines have plunged, after its chief executive painted a desperately gloomy picture of its prospects in a letter to staff.

Clearly this bleeding has to be stopped - and soon - or United will perish sometime next year

James Goodwin, United Airlines

The airline's costs were already exceeding revenues before the 11 September attacks, admitted James Goodwin, chairman and chief executive of parent company UAL.

"Today, the situation is exacerbated with costs exceeding revenues at four times the pre-September 11 rate," Mr Goodwin wrote.

"Today, we are literally haemorrhaging money. Clearly this bleeding has to be stopped - and soon - or United will perish sometime next year."

UAL is about to begin negotiations on an employment contract for 45,000 United Airlines staff, and is eager to slash its wage bill.

Shares slump

Publication of the letter caused UAL shares to plunge by 10% in New York trading.

The company's shares have now lost almost half their value since 11 September.

The company, one of the airlines most exposed to the crisis-hit US air-travel market, is expected to lose some $1bn this year, despite already having been handed close to $400m in state bailout money.

On Monday, it announced it was cutting capacity by 23% and departures by 27% with effect from 31 October.

It has also announced 20,000 job cuts.

Now, it is striving to renegotiate a pay deal, agreed in August last year, which promised pilots pay increases of up to 28%.

Aviation analysts say that the airline could not afford the pay hikes even before 11 September

Brutally frank

United is not the only airline to have been brutally frank to its staff.

In a taped message to Northwest Airlines employees, chief executive Richard Anderson said the carrier was not covering its costs.

In the first two weeks of October, Northwest only filled 68% of seats on domestic flights - way below the seasonal average.

Last month, Northwest Airlines announced that it was laying off 10,000 of its staff, part of a wave of lay-offs that has already claimed hundreds of thousands of employees across the aviation industry.