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United Is Still Cutting Flights, But This Could Help

Airline sees travel challenges continuing, but there's hope that one factor will ease.
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United Airlines  (UAL)  is gearing up for a rough summer as it cuts its flight schedule at its East Coast hub

Pilot shortages have been blamed for the slew of cancellations summer travelers have had to endure during the busiest traveling season.

This week, United announced it is cancelling roughly 50 daily flights at Newark Liberty Airpot through the end of the summer to "help minimize excessive delays and improve on-time performance."

When asked whether its Newark pullback will affect this forecast, a United spokesperson pointed TheStreet to interviews CEO Scott Kirby held with CNN and Bloomberg Thursday.

While Kirby didn't provide much color about the company's own outlook, he did discuss issues affecting the airline industry this summer.

Kirby indirectly did give an update on the company's previous expansion plans, saying that its capacity is still 13% smaller than it was in 2019 despite increasing demand.

"We do not have any staffing issues at United.... there are a lot of infrastructures, air traffic control being the biggest, that are causing real challenges for us and for others in the industry," Kirby told Bloomberg.

"So, in the U.S. industry the biggest bottleneck is probably air traffic control. They are doing everything they can but like many in the economy they're understaffed."

A New Agreement Could Help

United did make some progress by coming to a two-year agreement with its pilot union. 

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United and the United Master Executive Council representing 14,000 United pilots as part of the Air Line Pilots Association, International (ALPA) voted to approve a tentative agreement on modified terms for a collective bargaining agreement. 

The agreement will now go out to the rank and file for ratification.

The group says that a ratification will generate an additional $1.3 billion of value for United pilots over the course of the agreement. 

According to the agreement, the pilots will see pay increases of 14.5% over 18 months, retroactive to the start of 2022; enhanced overtime compensation and premium pay; and a new, 8-week paid maternity leave benefit among other perks. 

“This agreement raises the bar for all airline pilots and leads the industry forward,” said Capt. Michael Hamilton, Chair of ALPA’s United pilot group. “Our ability to reach this agreement, and the current success of United Airlines, is driven by front-line United pilots who stayed unified and focused throughout negotiations despite the incredible challenges we faced during the largest disruption in the history of aviation.”

Industry Turbulence In a Return to Normal

It has been a bumpy ride for airlines as the industry attempts to get back into a pre-pandemic swing following more than two years of decreased travel.

In April, American Airlines  (AAL) , Delta Air Lines  (DAL) , and Alaska Airlines all posted record first quarter revenue.

United saw its revenue jump 135% year over year to $7.57 billion. While the company still lost $1.36 billion in the quarter, its operating loss more than halved year over year.

Following the quarter, United forecast a profit in 2022 and its highest second quarter earnings of record on the back of a resurgence in travel demand.