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Posted: 6/5/2008 4:42:44 AM EST
Continental cuts 3,000 jobs, grounds planes
Nation's fourth-largest airline takes 67 airplanes out of service and slashes payroll in response to high fuel prices.

NEW YORK (CNNMoney.com) -- The crisis facing the airline industry, propelled by out-of-control fuel costs, claimed another victim on Thursday.

Continental Airlines said it is eliminating about 3,000 jobs, or 6.7% of its staff, and grounding 67 mainline aircraft in an attempt to cut costs amid record oil and fuel prices.

The airline - the nation's fourth-largest by miles flown by paying passengers - said it was facing the worst industry conditions since the terrorist attacks of Sept. 11, 2001.

"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," said Larry Kellner, Continental's chairman and chief executive officer, and President Jeff Smisek in a letter to employees. "We need to make changes in response."

In recognition of the company's crisis Smisek and Kellner said they would not be paid the remainder of their 2008 salaries and will refuse payment under the company's annual incentive program.

The company said the 3,000 job cuts will come starting in September, and it expects most will be made with voluntary severance packages. After 9/11, Continental (CAL, Fortune 500) cut 12,000 staff, then about 21% of staff, in reaction to the terrorist attack and the drop in demand for flights that followed.

"These record fuel costs have fundamentally shifted the economics of our businesses," the letter said. Continental estimates that the year-over-year rise in jet fuel amounts to about $50,000 per company employee.

Many airlines have hiked fuel surcharges to fares and added fees to once-free benefits, such as food and checked baggage. This latest move by Continental most likely means that passengers will need to pay even more to fly, according to airline analysts. Continental would not offer further comment beyond the press release.

Despite other cost cutting attempts, Continental said its increased fares will lead to fewer passengers, which will necessitate a reduction in its capacity. The airline said it will trim its domestic mainline departures by 16% starting in September by accelerating the retirement of much of its Boeing (BA, Fortune 500) 737 fleet. Customers should expect crowded planes as airlines reduce capacity.

The last time U.S. airlines were under this much pressure from fuel prices - in September 2005 - two of them, Delta Air Lines (DAL, Fortune 500) and Northwest Airlines (NWA, Fortune 500), filed for bankruptcy.

On Wednesday, No. 2 airline United (UAUA, Fortune 500) announced it was grounding 100 planes and cutting up to 1,600 jobs.

First Published: June 5, 2008: 7:28 AM EDT
http://money.cnn.com/2008/06/05/news/companies/continental_cuts/index.htm?eref=rss_topstories
Link Posted: 6/5/2008 4:44:50 AM EST
close it
Link Posted: 6/5/2008 4:45:10 AM EST
Find more oil.
Link Posted: 6/5/2008 4:45:26 AM EST
Create an Arabs only airline.
Link Posted: 6/5/2008 4:45:46 AM EST
Start a new industry without the massive overhead and beauracracy that has become the norm for major airlines.
Link Posted: 6/5/2008 4:45:56 AM EST
How do WE fix the airline? WE don't.

Let them charge what they need to to make a profit. Fuck taking my money and giving it to them in the form of a bailout.
Link Posted: 6/5/2008 4:52:32 AM EST
Make them compete. Quit subsidizing airports and rebuild the rail system.
Link Posted: 6/5/2008 4:52:45 AM EST
[Last Edit: 6/5/2008 4:56:02 AM EST by bluezerosix]

Continental cuts 3,000 jobs, grounds planes. How do you fix the airline industry?


Boo-Fucking-Hoo...

We don't "fix" the airlines.

We let them "fix" themselves.

It's called "free-market capitalism". You either adapt or die...or in this case go out of business.

Survival of the fittest. Grasp the concept, Forrest.
Link Posted: 6/5/2008 4:55:01 AM EST
take all the greenies out behind the wood shed and shoot them
drill for oil
problem solved
Link Posted: 6/5/2008 4:55:01 AM EST

Originally Posted By JonasWright:
Make them compete. Quit subsidizing airports and rebuild the rail system.


Yeah, more AMTRAK. That will fix it.
Link Posted: 6/5/2008 4:56:14 AM EST
They have to raise ticket prices. Plain and simple. It's cheaper to fly than drive nowadays. I just booked a flight to San Jose from Las Vegas and it cost me $139 plus taxes for a total of $158. It would cost me more in gas to drive.
Link Posted: 6/5/2008 5:00:26 AM EST

Originally Posted By Dance:
Continental cuts 3,000 jobs, grounds planes. How do you fix the airline industry?


Outsource it to Aeroflot, Hainan Airlines, and Mexicana.
Link Posted: 6/5/2008 5:03:32 AM EST
I think "we" need to stay out of it. "they" need to fix it. There is still a demand, they won't go away completely.
Link Posted: 6/5/2008 5:05:35 AM EST

Originally Posted By Screechjet1:

Originally Posted By JonasWright:
Make them compete. Quit subsidizing airports and rebuild the rail system.


Yeah, more AMTRAK. That will fix it.


Railroads, sheesh. Since were traveling back 100 years in transportation technology, why not just bring back Conestoga Wagons?

I'm not interested in bailing out the airlines, but to some of you who take the stand that they need to "adapt to make a profit or die" are partially correct and partially foolish. Some businesses that rely heavily on fuel simply cannot adapt. The airline industry however, is loaded with buckets full of executives earning way too much in salary. Market correction is always inevitable.
Link Posted: 6/5/2008 5:05:59 AM EST
[Last Edit: 6/5/2008 5:07:04 AM EST by SultanOfBrunei]

Originally Posted By Screechjet1:
Yeah, more AMTRAK. That will fix it.

You do realise that AmTrak is run byt the government, right?



wiki/Amtrak
All of Amtrak's preferred stock is owned by the U.S. federal government. The members of its board of directors are appointed by the President of the United States and are subject to confirmation by the United States Senate.
Link Posted: 6/5/2008 5:07:42 AM EST
[Last Edit: 6/5/2008 5:09:26 AM EST by America-first]
Expect higher fares, less service, more inconvenience and less frequent flights.

And fewer airlines to choose from.

There's no other way for airlines to ride this out.
Link Posted: 6/5/2008 5:07:45 AM EST

Originally Posted By SultanOfBrunei:

Originally Posted By Screechjet1:
Yeah, more AMTRAK. That will fix it.

You do realise that AmTrak is run byt the government, right?



wiki/Amtrak
All of Amtrak's preferred stock is owned by the U.S. federal government. The members of its board of directors are appointed by the President of the United States and are subject to confirmation by the United States Senate.


I needed the face. North America isn't Europe. Trains work in cities in NA.
Link Posted: 6/5/2008 5:08:09 AM EST
[Last Edit: 6/5/2008 5:08:58 AM EST by America-first]
dt
Link Posted: 6/5/2008 5:09:05 AM EST

Originally Posted By patriot73:
Some businesses that rely heavily on fuel simply cannot adapt.

What the fuck do you mean they "cannot adapt?" They have to pay more to get the job done, they must then ask for more money to do the job. People NEED to fly, so they will have to pay the price... or drive. Which ever is cheaper. I don't care if any company has a market, if they don't have customers they shouldn't be in business.
Link Posted: 6/5/2008 6:41:29 AM EST

Originally Posted By SultanOfBrunei:

Originally Posted By patriot73:
Some businesses that rely heavily on fuel simply cannot adapt.

What the fuck do you mean they "cannot adapt?" They have to pay more to get the job done, they must then ask for more money to do the job. People NEED to fly, so they will have to pay the price... or drive. Which ever is cheaper. I don't care if any company has a market, if they don't have customers they shouldn't be in business.


By "cannot adapt" it means that they will run out of liquidity before they can pass costs onto the consumer. Or, they lose money on the contract with the consumer (the ticket) because unanticipated (and to be fair, unprecedented) costs in their business.

How many builders would go out of business if their costs doubled in the middle of a contract, but the contractual terms stayed the same?
Link Posted: 6/5/2008 6:42:42 AM EST
How do you fix the airline industry?

Let the fuckers go under and stop bailing them out with taxpayer money.
Link Posted: 6/5/2008 6:50:11 AM EST

Originally Posted By Silence:
How do you fix the airline industry?

Let the fuckers go under and stop bailing them out with taxpayer money.


No bailout occured.

Loan guarentees do not equal "bailouts."
Link Posted: 6/5/2008 6:54:44 AM EST
Some should point-out the inflation tables and graphs, and explain it to them that it isn't as bad as the 70's.

Preferably the same ones that tried to explain it here on ARF that inflated fuel prices were largely imaginary.
Link Posted: 6/5/2008 6:58:52 AM EST

Originally Posted By Screechjet1:

Originally Posted By Silence:
How do you fix the airline industry?

Let the fuckers go under and stop bailing them out with taxpayer money.


No bailout occured.

Loan guarentees do not equal "bailouts."


5 billion in free money, and 10 billion in guarantees, is a bailout.
Link Posted: 6/5/2008 7:08:09 AM EST

Originally Posted By Silence:

Originally Posted By Screechjet1:

Originally Posted By Silence:
How do you fix the airline industry?

Let the fuckers go under and stop bailing them out with taxpayer money.


No bailout occured.

Loan guarentees do not equal "bailouts."


5 billion in free money, and 10 billion in guarantees, is a bailout.


5 Billion in free money. Got a source? How about 1.179 Billion in loan gaurantees.

The conditions the airlines found themselves in post 9/11 were a direct consequence of .gov inaction/act of war.

wiki link to Air Transport Stabilization Board
Link Posted: 6/5/2008 7:29:07 AM EST

Originally Posted By Screechjet1:

Originally Posted By Silence:

Originally Posted By Screechjet1:

Originally Posted By Silence:
How do you fix the airline industry?

Let the fuckers go under and stop bailing them out with taxpayer money.


No bailout occured.

Loan guarentees do not equal "bailouts."


5 billion in free money, and 10 billion in guarantees, is a bailout.


5 Billion in free money. Got a source? How about 1.179 Billion in loan gaurantees.

The conditions the airlines found themselves in post 9/11 were a direct consequence of .gov inaction/act of war.

wiki link to Air Transport Stabilization Board


5 billion was straight cash, Divided up between the airlines.

And the guarantees were lower than the 10 billion because the airlines had to trade the guarantees for below market stock options.

And 9-11 may have hurt the airlines, but they were hurting a LONG time before that beacause of shitty business practices. The whole bankruptcy thing is bullshit too.


Airlines bailout status

CHICAGO, Sept 24 (Reuters) - Beleaguered U.S. airlines will begin this week to get their share of a $15-billion federal bailout package approved last weekend and designed to offset the devastating financial impact of recent air attacks in the United States on the airline industry.

Suicide attacks two weeks ago, in which U.S. commercial jets were used to crash into New York's World Trade Center and Washington's Pentagon building, led to a two-day groundstop for U.S. air traffic and have sharply reduced air travel demand.

The federal aid package includes $5 billion in cash and $10 billion in loan guarantees, with a formula for relief based on available seat miles that translates to market share. The legislation also includes provisions to limit the airlines' liability from the attacks.

Here is an update on where the 10 major carriers now stand:

AMR Corp.'s American Airlines <AMR.N>

Airline analyst Glenn Engel of Goldman Sachs says he sees the largest U.S. commercial carrier getting about $900 million in cash. American has reduced its flight schedule by 20 percent and has slashed 20,000 jobs, or 14 percent of its staff. On Monday, the Fort Worth, Texas-based airline said it would cancel three routes: San Jose/Taipei, Chicago/Stockholm and Chicago/Birmingham, U.K. on a seasonal basis.

UAL Corp.'s United Airlines <UAL.N>

A spokesman for United, the No. 2 U.S. commercial airline, told Reuters on Saturday that he estimates the company's cash stake of the bailout package to be 17 to 18 percent of the total, which translates to about $900 million. On the heels of a 20-percent reduction in flights, the Chicago-based airline last week said it would furlough about 20,000 workers, or about one-fifth its staff.

Delta Air Lines Inc. <DAL.N>

No. 3 U.S. commercial airline Delta will likely get about $700 million in cash aid, according to rating service Standard & Poor's. The Atlanta-based airline last Thursday put its workers on notice for expected cost-cutting moves, including layoffs. It didn't say how many employees would be cut, but in a phone message to employees, Delta President Fred Reid said, "We estimate the drop in size of operations will be in the range of 15 to 20 percent."

Northwest Airlines Corp. <NWAC.O>

Goldman analyst Engel expects Northwest to get roughly $500 million in direct aid. The fourth-largest U.S. airline on Friday announced staff reductions of 10,000, or 19 percent of its work force.. The Minneapolis-based carrier has reduced its flight schedule by 20 percent.

Continental Airlines Inc. <CAL.N>. On Saturday, Houston, Texas based Continental said it expects its cash portion of the federal aid to be about $300 million. "It's the lifeline that we need to take us through the fall as the industry restabilizes itself," spokesman Dave Messing told Reuters. Last week the airline said it would furlough about 12,000 employees. The company has cut flights by 20 percent and has eliminated service to 10 cities. On Monday it said it would reduce the number of flights between Hong Kong and New York.

US Airways Group Inc. <U.N>

Arlington-Virginia-based US Airways on Monday said it soon expected to release a statement on its share of the federal aid, which S&P estimates will be roughly $340 million. The airline is reducing its schedule by 23 percent and is laying off 11,000 workers. Last week, it said it had less than $1.2 billion in cash on hand.

Southwest Airlines Co. <LUV.N>

Dallas-based budget carrier Southwest sees its share of direct cash aid at about $225 million to $315 million, Chief Financial Officer Gary Kelly told Reuters Monday. "Those are very rough estimates," he said. The company recently drew down its full line of credit of $475 million for a total cash position of roughly $1.4 billion. Southwest has not cut employees or routes.

America West Airlines <AWA.N>

Phoenix-based America West will likely get in excess of $100 million in cash aid, spokeswoman Patty Nowack said Monday. The carrier has cut 20 percent of service to the 90 cities it serves and is slashing about 2,000 jobs. "We have been acknowledging that load factors (paying passengers) are definitely down and we've seen a decline in booking," Nowack said. Cash on hand, she said, "is not significantly different from what we had before (Sept. 11)."

Alaska Airlines <ALK.N>

Seattle-based Alaska Airlines, expects to receive between $90 million to $100 million in direct aid, spokesman Jack Evans told Reuters Monday. The airline, which drew down a $150-million credit line following the attacks for a total of about $600 million in cash on hand, is now going through cash at the rate of about $1 million per day. The company on Friday said it plans to operate 80 to 85 percent of its regularly scheduled flights.

Amtran Inc.'s American Trans Air Inc. (ATA) <AMTR.O>

Indianapolis-based ATA is estimated to receive about $80 million in direct aid from the bailout, according to S&P. ATA, the tenth-largest U.S. airline, said last week that it would reduce it schedule by about 20 percent and furlough 1,500 workers.
Link Posted: 6/5/2008 7:34:13 AM EST
the obvious solution is to hire more management and fire more labor.


Link Posted: 6/5/2008 7:44:26 AM EST
Stop the bailouts and let them actually compete!
Link Posted: 6/5/2008 7:46:03 AM EST
But wait, the market is doing soooo well today!!!!


Link Posted: 6/5/2008 7:48:21 AM EST

Originally Posted By Silence:

5 billion was straight cash, Divided up between the airlines.

And the guarantees were lower than the 10 billion because the airlines had to trade the guarantees for below market stock options.

And 9-11 may have hurt the airlines, but they were hurting a LONG time before that beacause of shitty business practices. The whole bankruptcy thing is bullshit too.



That 5 billion was absorbed by increases in the insurance premiums faced by airlines, and security requirements implemented immediately after 9/11.

You will get no argument out of me regarding the shitty management practices of the airlines, or their blantant misuse of bankruptcy to strong-arm labor and creditors (Northwest's bankruptcy was a classic example of this.)

However, the system on 9/12 was the on the brink of complete collapse. As in, no major airlines in the U.S. flying, period.

The 9/11 attacks were an unprecedented act of war. Unprecedented in the fact that I can't think of another time in U.S. where a major U.S. industry was used as a weapon by the enemy.

The fact that the government allowed it happen is criminal. So, if you want to blame anyone for the bailouts, blame the government that allowed the situation to transpire in the first place.

If LNG carriers or railroads had been used on 9/11, I'd be for a bailout of the LNG carriers and railroads, rather than see that industry fail.
Link Posted: 6/5/2008 8:02:25 AM EST
The Airlines just need to raise there prices and stop being so overly competitive that they put them selves out of business they charging almost the same as they were in the 70's. some of this can be obtained by streamlining but you can't streamline profit.
Link Posted: 6/5/2008 9:41:27 AM EST
I think there's some rule where an airline isn't allowed to go more than what, 3 years or so without filing BK.
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