Continental to ground jets, axe jobs

Continental Airlines Inc said it will eliminate 3,000 jobs and shrink its fleet by 67 planes, becoming the fourth major US carrier to slash payroll and flights because of soaring fuel prices.

"The airline industry is in a crisis," Chief Executive Larry Kellner and President Jeff Smisek said in a memo to employees. "The actions we are announcing today are necessary to secure our future." The executives said they would forgo their salaries and bonuses for the rest of the year.

Continental, the fourth-largest US carrier, will seek volunteers to give up their jobs before dismissing workers to cut 6.6 percent of its workforce. Yesterday's changes at the Houston-based carrier go beyond an April reduction and follow fare increases that failed to cover rising costs.

The moves come a day after UAL Corp's United Airlines, the second-largest US carrier, announced it was shutting its low- fare Ted brand and retiring 70 jets. United and Continental join AMR Corp's American Airlines and Delta Air Lines Inc in reducing flights after a 71 percent surge in fuel prices over the past year.

Continental gained 50 cents to $15 at 8:18 am, before regular New York Stock Exchange composite trading.

At current prices, Continental's fuel bill will rise $2.3 billion above what it spent last year, or about $50,000 more per employee, the company said.

Jet-fuel costs have surpassed labor as the biggest expense for most carriers. JPMorgan Chase & Co analyst Jamie Baker has estimated a $7.2 billion industrywide loss for 2008.

Most of the job cuts will occur after the peak summer travel season, except for management and clerical positions, which will begin sooner, the airline said.

It's the third time this year that Continental has slowed its planned growth. By the fourth quarter, the airline will have reduced daily departures by its main jet fleet by 16 percent. Further details on schedule changes will be provided next week.

United's retrenchment is deeper than the 12 percent reduction in domestic seating capacity planned by American, the world's largest carrier, and the 11 percent goal of Delta Air Lines Inc, No 3 in the US.

Continental will pull all Boeing Co 737-300 aircraft, its oldest and least fuel efficient, from its fleet by the end of 2009.

Continental has about 372 planes in its main jet fleet and about 45,610 employees.

Meanwhile, Qantas Airways Ltd, Australia's largest carrier, plans to slash services to Japan, shift other Asian routes to low-cost unit Jetstar and cut jobs in response to surging fuel costs.

The carrier will stop its Melbourne-Tokyo service from September, and trim flights from Sydney to the Japanese capital, it said yesterday.

Agencies

(China Daily 06/06/2008 page17)