After UAL, Continental to ground 67 aircraft
US carrier Continental Airlines said on Thursday it will cut 3,000 jobs, remove 67 less fuel-efficient planes from its fleet and reduce services to cope with record-high fuel prices.
By Agencies |
WASHINGTON: US carrier Continental Airlines said on Thursday it will cut 3,000 jobs, remove 67 less fuel-efficient planes from its fleet and reduce services to cope with record-high fuel prices.
���The airline industry is in a crisis. It���s business model does not work with the current price of fuel and the existing level of capacity in the marketplace,��� chairman and chief executive Larry Kellner and president Jeff Smisek wrote in a letter to the company���s more than 45,000 employees.
���We will need to reduce our capacity to match the reduced demand These actions are among many steps Continental is taking to respond to record-high fuel prices as the industry faces its worst crisis since 9/11,��� they wrote, referring to the September 11, 2001 terror attacks in the United States.
The company said in a statement that Kellner and Smisek will decline their salaries for the rest of the year and any payment under the annual incentive program for 2008, ���in recognition of the crisis and its effect on their co-workers.���
Shares in Continental jumped 10% to $15.95 in late morning New York trade. The Continental announcement came a day after rival United Airlines, the second-largest US carrier, said it was removing 100 aircraft, or about 20% of its fleet, from operations and cutting up to 1,100 additional jobs by the end of the year in a bid to compete in the crisis.
American Airlines announced on May 21 that it would cut domestic flights significantly, shed workers and raise some fees charged to passengers as it also battles to offset inflated crude oil prices. Continental noted the price of Gulf Coast jet fuel closed on Wednesday at $151.26 ��� about 75% higher than what it was a year ago.
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���At that price and at our current capacity, our fuel expense this year would be $2.3 billion more than it was last year. That increase alone amounts to about $50,000 per employee,��� the Houston, Texas-based airline said. Continental said it would reduce its domestic flights starting in September after the peak summer season, trimming them in the fourth quarter by 16% from the same period in 2007. Overall domestic capacity, or available seat miles, will be reduced by 11% in the final quarter.
The company said it would provide details on the specific flights and destinations that are subject to reduction or elimination by the end of next week. International departures will be reduced a modest 1.6% in the fourth quarter.
Because of the capacity reductions, Continental said it would eliminate about 3,000 jobs, including management positions, through voluntary and involuntary separations, with the majority expected to be through voluntary programs.
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The reductions will take effect after the peak summer season, except for management and clerical cutbacks, which will begin sooner, it said. Continental said it would remove the least-efficient aircraft from its network by accelerating the retirement of its Boeing 737-300 and 737-500 fleets. By the end of 2009, all 737-300 aircraft will be retired from Continental���s fleet. Continental said it would continue to take delivery of new, fuel-efficient Boeing 737-800s and 737-900ERs.
By the end of the second quarter of 2008, Continental said it would operate 375 aircraft. Taking into account both the accelerated retirements and scheduled deliveries, Continental��� s fleet count will shrink to 356 aircraft in September 2008 and 344 aircraft at the end of 2009.
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