Yields, bag-fees both bigger and better at Continental
So are these very heavy bags or what? Continental Airlines thinks that it will "generate in excess of $100 million dollars in net benefits" annually from its recently announced move to start charging $15 to check a first bag as of October 7. The airline said in a Securities and Exchange Commsssion filing that its estimate is based on "incremental revenue and operational cost savings." It also said in its investor upgrade that it is "comfortable with its forward bookings over the next six weeks" and that bookings were up by 2 to 4 points everywhere except across the Atlantic, where they are flat. As it cuts capacity this quarter (2.9%) and next (11%), Continental anticipates "substantially higher mainline domestic yields," it said.
JP Morgan's Jamie Baker says this is a good sign: "more bookings on significantly less capacity is simply a drawn-out way of expressing pricing power." Continental's language, he says, appears to be "an effort to assuage largely misplaced investor fears that demand is about to crater." The new checked luggage policy is pretty much the same as those adopted by other carriers that followed American Airlines lead: elite level frequent flyers are exempt, passengers in first or BusinessFirst, those on full-fare economy tickets ('Y') and the policy applies only to US, Canada, and Puerto Rican and Virgin Island destinations.
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