Continental Airlines Inc said it will pull more planes from service, add fees to some low-fare tickets and make about 100 other changes to save more than US$350 million a year. Customers can expect to encounter more rules and a US$20 charge for paper tickets.
Continental's plan follows AMR Corp's announcement that it is cutting 7,000 jobs at American Airlines and reducing capacity 9 percent by November to save US$1.1 billion a year at the world's largest carrier. US Airways Group Inc recently filed for Chapter 11 bankruptcy protection and United Airlines parent UAL Corp has warned it may do the same if it can't lower costs.
"We need to do some aggressive belt-tightening so we don't end up like them," Continental Chief Executive Officer Gordon Bethune said in a statement. "Unless market conditions improve quickly, we'll be forced to make further changes."
Airlines are trying to slash costs and boost revenue to stem losses that totaled a record US$7.3 billion last year and more than US$3.8 billion in this year's first half. Corporate travel, a major source of airline revenue, has been cut in the recession and vacation travelers who have filled planes since the Sept. 11 terrorist attacks refuse to pay higher fares.
Yesterday's actions, which include taking 11 Boeing Co MD-80 aircraft out of service by the end of next year, still likely won't be enough to return Houston-based Continental to profit, Chief Financial Officer Jeff Misner said. The company is forecast to lose US$0.39 a share this quarter and US$1.12 next quarter, the average estimates of analysts polled by Thomson First Call.
The cost reductions would equal about US$3.20 a share after taxes, with about US$80 million, or US$0.72, being recognized this year, said Michael Linenberg, a Merrill Lynch analyst.
The shares of the fifth-largest US carrier rose US$0.73, or 8.7 percent, to US$9.10 at 4:15pm in New York Stock Exchange composite trading. The news pushed up rivals' shares.
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