Continental latest to implement big fleet, capacity cuts

Philadelphia
Source: Flightglobal.com
This story is sourced from Flightglobal.com

Continental Airlines has joined the growing list of US legacy carriers that are slashing capacity, pulling down older aircraft and initiating layoffs in the face of what the SkyTeam member calls the industry’s "worst crisis" since the 11 September 2001 terrorist attacks.

Struggling to offset record-high fuel prices, Continental says it will reduce its domestic mainline capacity by 11% in the fourth quarter. Details of specific service changes, slated to begin in September, will be released by the end of next week.

To support this reduction in available seat miles, Continental plans to retire 67 Boeing 737-300 and -500 aircraft from its fleet, in addition to six older aircraft already removed this year. The carrier leases a large portion of both types.

Given the "need for prompt capacity reductions in today’s environment", says Continental, a total 27 of the 67 aircraft will be culled in September. By the end of 2009, all 737-300s will be retired from Continental’s fleet.

Delivery of new 737NGs will continue. However, after 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.

As a consequence, the carrier plans to eliminate about 3,000 positions, including management jobs, through voluntary and involuntary separations, with the majority expected to be through voluntary programmes. The reductions will take effect after the peak summer season, except for management and clerical reductions, which will begin sooner.

Continental chairman and CEO Larry Kellner in a letter to employees says: "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. Although these changes will be painful, we must adapt to the reality of today’s market to successfully navigate these difficult times."

Continental’s announcement falls hard on the heels of United Airlines’ news yesterday that it will slash a total 100 aircraft from its fleet, and American Airlines’ recent move to reduce both mainline and regional affiliate capacity through fleet cuts. Other carriers are implementing capacity reduction schemes of various degrees. Northwest Airlines in April said it would shave 5% of its capacity at the end of the peak summer travel season. Yesterday, the carrier revealed it is reviewing its capacity plan in light of unprecedented fuel costs.