UA Offers Expansion Plan..Stocks Tumble. Pres Kirby "We're Playing Catch up.

Airline stocks went into a nosedive Yesterday on investor fears that a plan by United Airlines to grow rapidly will undercut prices and profits.



Shortly after the opening bell, shares of United Continental Holdings Inc. were down 10.2% at $70.05. American, Delta and Southwest also fell. Billions of dollars in market value evaporated.



United was the nation's biggest airline a decade ago but has slipped behind American and Delta. United executives say they have to rebuild service on routes that the airline abandoned if it wants to regain high-paying connecting passengers.




Investors fear that United's plan — on top of growth by other airlines — will flood the market with too many flights and seats, triggering ruinous fare wars to keep planes full.






Following United shares, American Airlines Group Inc. was down 5.7% at $54.96. Delta Air Lines Inc. slid 5.8% to $56.47. Southwest Airlines Co. declined 3% to $63.32.


After the market closed Tuesday, United reported solid financial results for the fourth quarter. Profit jumped 46% to $580 million, beating Wall Street's expectations. The airline indicated that average prices are heading higher, which cheered investors.


In after-hours trading, however, the company's stock went into a tailspin midway through a meeting with Wall Street analysts that was webcast for all to hear.



The breaking point was United's disclosure that it plans to add between 4% and 6% to its passenger capacity this year and maintain that pace through 2020.


"What we are doing is, frankly, catching up," Kirby told analysts.



Kirby said United can't afford to ignore discount carriers such as Spirit Airlines because half of its customers choose an airline mostly on ticket price.



"The best way to compete with a low-cost carrier is matching prices," he said. "No one chooses to fly on an ultra-low-cost carrier if they can get the same price on United Airlines, nobody."