Continental Airlines makes cuts
[6th June 2008]
One of the clearest indications yet of the crisis facing the airline industry is Continentals decision to reduce its fleet by 67 and eliminate 3,000 jobs.
In an open letter to 45,000 airline staff, Continental chairman Larry Kellner and CEO Jeff Smisek write: The airline industry is in a crisis. Its business model doesn't work with the current price of fuel and the existing level of capacity in the marketplace. We need to make changes in response.
While there have been several successful fare increases, those increases haven't been sufficient to cover the rising cost of fuel. As fares increase, fewer customers will fly. As fewer customers fly, we will need to reduce our capacity to match the reduced demand. As we reduce our capacity, we will need fewer employees to operate the airline, the letter continues.
Continental says that fuel prices are 75% higher than a year ago and at this price and current capacity would add $2.3 billion to its annual fuel bill. At these prices it says a large number of its flights are losing money.
After the peak summer season and starting in September, Continental will reduce its number of mainline departures by 16%. The airline will also retire its least efficient aircraft.
This year an extra 37 Boeing 737-300 and 737-500 planes will be axed, followed by another 30 in 2009. However, Continental will continue to take delivery of new fuel efficient NextGen Boeing 737-800s and 737-900ERs. As a result it says fuel efficiency will improve immeasurably.
The airline hopes that the majority of the 3,000 jobs it needs to cut will be achieved through voluntary redundancy. Kellner and Smisek will not take their salaries or any incentives for the rest of this year.
Written by: Nick Purdom
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