United to Cut Domestic Capacity

UAL(UAUA Quote - Cramer on UAUA - Stock Picks), the parent company of No. 2 U.S. carrier United Airlines, is reducing domestic capacity growth to meet slow demand.

The company said Thursday it will reduce domestic capacity by 2% while increasing international capacity by 0.5%. Later this year, United plans to add service between Los Angeles and Hong Kong and between Washington, D.C., and Rio De Janeiro, Brazil.

"Given the domestic market's slow revenue growth and excess capacity, we believe that removing marginal domestic capacity is the appropriate response," UAL Executive Vice President and Chief Revenue Officer John Tague said in a statement. "Some capacity will move internationally to meet the service needs of our customers and extend United's market-leading position at Los Angeles International and Washington-Dulles airports."

The overall reduction in capacity moved the company to increase its guidance for second-quarter and full-year expenses. For the three months ended June 30, United expects mainline operating costs per available seat mile, excluding fuel, severance and other items, to increase 1% from the prior-year period to 7.72 cents. The expected increase for the full year is between 7.74 cents and 7.78 cents, an increase of between 1.5% and 2%.

The stock was trading up 15 cents to $35.78 in recent after-hours trading.