America's second biggest airline said it will reduce its workforce by 13 per cent - or 7,000 staff - and axe more than a sixth of domestic routes in a desperate attempt to cut costs to cope with the surging cost of fuel.

The job cuts mean that United Airlines will have announced plans to axe a total of 11,000 jobs in the past year as the carrier attempts to lower its operating costs amid record oil prices and a slowing US economy.

The airline explained that it would also drop 7 per cent of all international routes including Denver to London and San Francisco to Nagoya, Japan.

United, which is owned by UAL, said that it had permanently grounded 100 aircraft and had managed to re-mortgage some of its remaining fleet to raise cash.

Unveiling the airline's second quarter results, Glenn Tilton, chairman and chief executive, said: "Our industry is challenged as never before by the unrelenting price of oil, and United is taking aggressive action to offset unprecedented fuel costs and to strengthen the competitiveness of our business.”

During the three months to June 30, the airline plunged into a $2.73 billion loss, compared with a profit of $274 million for the same period the year before. Revenue for the quarter rose 3 per cent to $5.37 billion. The airline said its fuel costs rose 53 per cent to $1.8 billion for the quarter.

Chris Tarry, the independent aviation consultant at CTAIRA, told The Times: "What is interesting here is that in Europe airlines are just temporarily grounding aircraft, where they are still incurring fixed costs. In the US, they are getting rid of them altogether. United is having to completely re-size and re-shape its business. With fuel prices rising so rapidly, there is no point trying to cut costs round the edges, it makes no difference."

He added: "There are only three issues for global airlines now - oil, cash and for some, survival. I have never seen anything like this market, and I've been covering it for 30 years."

On Wall Street, shares in UAL soared 47 per cent (correct) to $7.36 as the oil price slipped further. Light, sweet crude for August delivery fell $4.56 to $126.48, down from $147 last week as fears about hurricane season disruptions subsided. Traders were also cheered by United's drastic cost-cutting plans.

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