United Airlines plans to ground more than a fifth of its fleet, slash its domestic capacity by as much as 18 per cent by the end of next year and cut as many as 1,600 jobs in the latest sign of the crisis gripping the US airline industry amid record oil prices and a slowing economy.

The move to cut flights by the second largest US carrier came as a drastic follow-up to failed merger talks with US Airways and Continental, which both collapsed in little more than a month.