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Posted: 6/5/2008 5:42:44 AM EDT
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 |
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Start a new industry without the massive overhead and beauracracy that has become the norm for major airlines.
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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. |
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Make them compete. Quit subsidizing airports and rebuild the rail system.
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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. |
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take all the greenies out behind the wood shed and shoot them
drill for oil problem solved |
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Yeah, more AMTRAK. That will fix it. |
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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.
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Outsource it to Aeroflot, Hainan Airlines, and Mexicana. |
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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.
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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. |
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You do realise that AmTrak is run byt the government, right?
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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. |
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I needed the face. North America isn't Europe. Trains work in cities in NA. |
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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. |
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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? |
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How do you fix the airline industry?
Let the fuckers go under and stop bailing them out with taxpayer money. |
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No bailout occured. Loan guarentees do not equal "bailouts." |
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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. |
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5 billion in free money, and 10 billion in guarantees, is a bailout. |
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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 |
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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.
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the obvious solution is to hire more management and fire more labor.
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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. |
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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.
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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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