Continental planning reductions

Kristen Hays

Wednesday, Aug. 21, 2002 | 9:54 a.m.

HOUSTON -- From reducing plastic knife use in coach to grounding planes, Continental Airlines is undertaking a series of sharp financial steps to combat the slump the airline industry has suffered since the Sept. 11 attacks.

The Houston-based airline, the nation's fifth largest, hopes to save $350 million annually and $80 million for the rest of 2002 as a result of the changes announced Tuesday.

A year from now, Continental will be flying 17 percent fewer seats compared to August 2001 levels. It also plans to ground 11 airplanes in its fleet and hopes to reduce its capacity by 4 percent, spokesman Rashaan Johnson said.

The moves come after Continental's larger rivals have cut jobs, capacity or both in response to fewer people flying than before the terrorist attacks. US Airways and Vanguard Airlines have filed for bankruptcy, and the No. 2 carrier, United Airlines, has warned it could do the same.

American Airlines, the nation's biggest carrier, announced last week it would cut 7,000 jobs and reduce capacity 9 percent by November. United and Northwest Airlines have said they will cut capacity 9 percent and 13 percent, respectively, for winter.

But American hasn't announced plans to shrink capacity in 2003, while Continental is looking ahead for deeper cuts.

Continental said the cuts were necessary to combat continued deterioration of revenue and the increased cost of fuel, insurance and security.

"It's a stand-alone initiative by Continental to fix the significant current profitability problem," Lehman Brothers analyst Garrett Chase said.

The company announced no layoffs, saying it would monitor employee levels and "hopes to avoid additional furloughs" through a hiring freeze, retirements, voluntary leaves and attrition.

"US Airways declared bankruptcy and United is likely to soon follow," Gordon Bethune, chairman and chief executive of Continental, said. "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."

Bethune said more changes would come "unless market conditions improve quickly."

Continental also said it would continue providing full services to full-fare customers while charging low-fare travelers for certain services. Johnson said such services have yet to be announced.

Changes include:

A $20 fee for domestic paper tickets.

Elimination of discounts on some low-fare categories.

A new policy against "waivers and favors," such as allowing tickets bought 13 days ahead of time to have the same discounts as those bought with a 14-day lead.

Re-bidding of some supplier contracts.

Adherence to policies regarding assessment of fees for changing tickets and collection of excess baggage.

Not offering plastic knives with breakfast trays in coach. The knives will be available on request. The company expects that move alone will save $85,000.