WASHINGTON (AFP) — US carrier Continental Airlines said Thursday it will cut 3,000 jobs and pull 67 aging planes in a massive retrenchment in the face of record-high fuel prices.
Continental's retrenchment followed similar moves announced by two other big US carriers, American and United Airlines.
"The airline industry is in a crisis. Its business model does not work with the current price of fuel and the existing level of capacity in the marketplace," chairman and chief executive Larry Kellner and president Jeff Smisek wrote in a letter to the company's more than 45,000 employees.
"We will need to reduce our capacity to match the reduced demand ... these actions are among many steps Continental is taking to respond to record-high fuel prices as the industry faces its worst crisis since 9/11," they wrote, referring to the September 11, 2001 terror attacks in the United States.
The company said in a statement that Kellner and Smisek will forego their salaries for the rest of the year and any payment under the annual incentive program for 2008, "in recognition of the crisis and its effect on their co-workers."
Continental, the world's fifth-largest airline as measured by revenue passenger miles, became the latest airline to aggressively downsize in the face of record fuel prices, a global credit squeeze and a slowing US economy.
Its announcement came a day after UAL, the parent of United Airlines, the second-largest US carrier, said it was removing 100 aircraft and cutting up to 1,100 additional jobs.
Two weeks earlier, AMR, the parent of the US leader American Airlines, announced it would cut domestic flights sharply, shed workers and raise some passenger fees.
Including the Continental job cuts, the industry has shed nearly 22,000 jobs, more than double the 2007 year total of 21,710, global outplacement firm Challenger, Gray & Christmas said.
Continental noted in the statement that the price of Gulf Coast jet fuel was about 75 percent higher than what it was a year ago, costing it an additional 2.3 billion dollars compared with last year's bill, which amounts to some 50,000 dollars per employee.
Morningstar analyst Brian Nelson said that capacity cuts announced by Continental, UAL and AMR show that the industry is "moving in the right direction."
"However, more aggressive participation by other carriers may be required for most airlines to get back into the black at today's crude-oil prices," Nelson said.
Shares in Continental closed off earlier highs at 15.20 dollars, up 4.83 percent in New York trade.
Starting in September, after the peak summer season, Continental plans to reduce its domestic flights and trim domestic capacity by 11 percent in the final quarter.
The Houston, Texas-based company said it would provide details on the specific flights and destinations affected by the end of next week.
International departures will be reduced a modest 1.6 percent in the fourth quarter.
Because of the capacity reductions, Continental said it would eliminate about 3,000 jobs, including management positions, through voluntary and involuntary separations.
The company will accelerate the retirement of its Boeing 737-300 and 737-500 fleets to be completed by end-2009. It has pulled six aircraft this year to date.
It will continue to take delivery of new, fuel-efficient Boeing 737-800s and 737-900ERs.
By the end of the second quarter of 2008, Continental said it would operate 375 aircraft and by end-2009 the fleet will have shrunk to 344.
The beleagured airline reported a first-quarter 2008 net loss of 80 million dollars in mid-April, the same month it walked away from advanced merger talks with United to create the world's largest airline, citing the harsh industry environment.
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