Updated from 12:27 p.m. EDT

Responding to the rapid escalation in fuel costs, United Airlines says it will reduce its fleet by 100 aircraft, taking out 17% to 18% of its mainline domestic capacity by 2009, and eliminate several thousand jobs.

The move puts United, a unit of UAL ( UAUA), in the forefront of the capacity-cutting efforts by U.S. carriers who are trying to cope with high oil prices by paring the oldest, least fuel-efficient aircraft from their fleets.

"This environment demands that we and the industry act decisively and responsibly," said CEO Glenn Tilton in a prepared statement.

Among the casualties will be United's leisure-oriented Ted unit. Ted's 56 Airbus A320 aircraft will be reconfigured in 2009 to include first-class seats.

United will retire all 94 of its Boeing 737s, provided it can reach an agreement with lessors, as well as six Boeing 747s. About 80 planes will be out of the schedule by year-end. The mainline domestic capacity reduction will total 14% in the fourth quarter and another 11% in 2009, for a cumulative total of 17% to 18%.

The overall reduction will be between 9% and 10%. Even international capacity, which has been growing at most carriers, is slated for a 4% to 5% decrease by the end of next year.

Meanwhile, thousands of jobs will be lost. United will reduce the number of salaried and management employees and contractors by 1,400 to 1,600, including 500 previously announced, by the end of this year. It said it will determine the number of front-line employee furloughs after revising its schedule over the next month. In general, schedule changes will include reductions in underperforming markets and frequency reductions.

When completed, the fleet reduction will lower the average fleet age to 11.8 years. "The decision to dramatically reduce our capacity profile, particularly in the domestic marketplace, while over time eliminating a fleet type, is a significant step leading to a more effective and efficient operating fleet for United in the years ahead," said Chief Operating Officer John Tague, in a prepared statement.

Last month, AMR's ( AMR) American Airlines said it would chop mainline domestic capacity by 11% to 12% in the fourth quarter, retiring at least 75 mainline and regional aircraft. Overall capacity will decline by 7% to 7.5%, and thousands of employees will be let go.

Delta ( DAL - Get Report), which is merging with Northwest ( NWA), has also announced capacity cuts of about 10%, accompanied by about 3,000 job losses.

Shares of UAL rose 7.2% to $9.14.