Continental to Cut Flights, Charge Fees on Low-Fare Tickets

Continental Airlines Inc. said Tuesday that it will cut flights, park aircraft and charge low-fare customers new fees in an effort to stem financial losses since the Sept. 11 attacks.

Continental, the No. 5 U.S. airline, said it will provide 17% fewer seats on domestic flights by August 2003 compared with August 2001. Capacity will be reduced by 4% over the next year.

The actions follow a decision last week by AMR Corp.’s American Airlines, the world’s largest airline, to cut 7,000 jobs, retire aircraft and make schedule changes. Other carriers also are reducing their winter flight schedules beyond the normal seasonal reductions.

Continental said details of service and fee changes will be unveiled over the next several weeks. “These changes enable customers to select the products and services they value and are willing to pay for,” the airline said.

Shares of Houston-based Continental rose 73 cents on the news, or nearly 9%, to $9.10, on the New York Stock Exchange.

“These are challenging times in our industry and we need to do something now,” said Chairman and Chief Executive Gordon Bethune. “US Airways declared bankruptcy and United is likely to follow soon. American is eliminating 7,000 jobs. While we remain committed to running a clean, safe and reliable operation, we need to do some aggressive belt tightening so we don’t end up like them.”

Continental, which was twice in Bankruptcy Court in the 1990s, said it is making more than 100 changes, which include adding a $20 fee for all domestic paper tickets, eliminating discounts on certain low-fare categories, and rigidly enforcing fare rules.

The carrier announced no layoffs, saying it “hopes to avoid additional furloughs” through a hiring freeze, retirements, voluntary leaves and attrition.

US Airways Group Inc. filed for Chapter 11 bankruptcy protection Aug. 11. UAL Corp.’s United warned last week it may have to do the same this fall unless it can cut its costs sharply.

Like other major airlines, Continental has been losing money since the attacks as traffic and fares remain low. In the second quarter, it lost $139 million.

The airline said it will remove an additional 11 MD-80 aircraft from its schedule by the end of 2003, after having grounded 48 jets in the last year.

The moves are expected to generate pretax gains of about $80 million for the rest of the year and $350 million annually once fully in place, the company said.