Continental to Reduce Capacity, Fleet and Staffing
06-05-2008, 03:31 AM
#1
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Joined APC: Apr 2008
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Continental to Reduce Capacity, Fleet and Staffing
Continental to Reduce Capacity, Fleet and Staffing
Thursday June 5, 7:00 am ET Sixty-seven mainline aircraft and 3,000 positions to be eliminated; CEO and President decline their salaries for the remainder of the year
HOUSTON, June 5 /PRNewswire-FirstCall/ -- Continental Airlines (NYSE: CAL - News) released to its more than 45,000 employees the following employee bulletin and message from Larry Kellner, chairman and chief executive officer, and Jeff Smisek, president. Continental does not anticipate any further comment until after it has had the opportunity to meet with employees during the next week.
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if(window.yzq_d==null)window.yzq_d=new Object();window.yzq_d['8jedA0wNBlo-']='&U=13fb2gp9j%2fN%3d8jedA0wNBlo-%2fC%3d626899.12331415.12723508.1383221%2fD%3dLREC %2fB%3d5133107%2fV%3d1';Dear Co-worker:
We've always said that you deserve open, honest and direct communication. This letter and the attached employee bulletin and Q&A are part of that commitment.
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. We need to make changes in response.
While there have been several successful fare increases, those increases haven't been sufficient to cover the rising cost of fuel. As fares increase, fewer customers will fly. As fewer customers fly, we will need to reduce our capacity to match the reduced demand. As we reduce our capacity, we will need fewer employees to operate the airline. Although these changes will be painful, we must adapt to the reality of today's market to successfully navigate these difficult times.
The attached employee bulletin and Q&A outline some of the steps we are taking to address this industry crisis. The situation for all airlines is serious, and the actions we are announcing today are necessary to secure our future. We regret the loss of jobs caused by this crisis, and we will do our best to minimize furloughs and involuntary terminations.
These actions will help Continental survive this crisis. You have our ongoing commitment to keep you informed as the industry evolves and adapts to these unprecedented challenges. It is important that we all keep our focus on working together during these difficult times.
Tony Jeff
Employee Bulletin No. 9
Continental today is announcing significant reductions in flying and staffing that are necessary for the company to further adjust to today's extremely high cost of fuel. 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.
The price of Gulf Coast jet fuel closed yesterday at $151.26 -- about 75 percent higher than what it was a year ago. At that price and at our current capacity, our fuel expense this year would be $2.3 billion more than it was last year. That increase alone amounts to about $50,000 per employee.
These record fuel costs have fundamentally shifted the economics of our business. At these fuel prices, a large number of our flights are losing money, and Continental needs to react to this changed marketplace.
Network Changes
Starting in September, at the conclusion of the peak summer season, Continental will reduce its flights, with fourth quarter domestic mainline departures to be down 16 percent year-over-year. This will result in a reduction of domestic mainline capacity (available seat miles, or ASMs) by 11 percent in the fourth quarter, compared to the same period last year.
By the end of next week, Continental will provide details on specific flights and destinations that are subject to reduction or elimination. For additional information on departures and capacity for 2008 and 2009, see Table A.
Co-worker Impact
As a result of the capacity reductions, Continental will need fewer co-workers worldwide to support the reduced flight schedule. About 3,000 positions, including management positions, will be eliminated through voluntary and involuntary separations, with the majority expected to be through voluntary programs.
The company will offer voluntary programs in an effort to reduce the number of co-workers who will be furloughed or involuntarily terminated due to the capacity cuts. Details of these programs will be available next week.
The reductions will take effect after the peak summer season, except for management and clerical reductions, which will begin sooner.
In recognition of the crisis and its effect on their co-workers, Larry and Jeff have declined their salaries for the remainder of the year and have declined any payment under the annual incentive program for 2008.
Fleet Changes
Continental will reduce the size of its fleet by removing the least efficient aircraft from its network. To accomplish this, Continental is accelerating the retirement of its Boeing 737-300 and 737-500 fleets. In the first six months of 2008, Continental removed six older aircraft from service. Continental will retire an additional 67 Boeing 737-300 and 737-500 aircraft, with 37 of these additional retirements occurring in 2008 and 30 in 2009. Given the need for prompt capacity reductions in today's environment, 27 of the 67 aircraft will be removed in September. By the end of 2009, all 737-300 aircraft will be retired from Continental's fleet.
Continental will continue to take delivery of new, fuel-efficient NextGen Boeing 737-800s and 737-900ERs. Overall fuel efficiency will improve measurably as Continental takes delivery of 16 of these aircraft in the second half of 2008 and 18 in 2009 and accelerates the retirement of the older, less fuel-efficient aircraft as mentioned previously.
By the end of the second quarter of 2008, Continental will operate 375 mainline aircraft. Taking into account both the accelerated retirements and scheduled deliveries, Continental's fleet count will shrink to 356 aircraft in September 2008 and 344 aircraft at the end of 2009 (see attached Table B).
TABLE A: Network Changes Departures Estimated Average Daily Departures and Year-over-Year Percent Change 3Q '08 4Q '08 FY 2009 Daily % Change Daily % Change % Change Depts. Depts. Mainline Domestic 831 (5.7%) 733 (16.0%) (9.8%) to (11.8%) Mainline International 298 0.7% 251 (4.1%) (1.1%) to 0.9% Mainline System 1,129 (4.1%) 984 (13.2%) (7.1%) to (9.1%) Regional 1,425 3.6% 1,287 (4.1%) (5.4%) to (7.4%) Consolidated 2,554 0.0% 2,271 (8.3%) (6.1%) to (8.1%) Available Seat Miles (ASMs) Estimated Year-over-Year Percent Change 3Q '08 4Q '08 FY 2009 Mainline Domestic (3.0%) (11.4%) (3.4%) to (5.4%) Mainline International 3.4% (1.6%) 0.0% to 2.0% Mainline System 0.1% (6.8%) (0.7%) to (2.7%) Regional 7.5% (1.5%) (7.4%) to (9.4%) Consolidated 0.9% (6.2%) (1.4%) to (3.4%) TABLE B: Continental Airlines Mainline Fleet Plan as of June 5, 2008 Net Net Total @ Changes Total @ Changes Total @ 6/30/08E 2H08E YE 2008E 2009E YE 2009E Mainline Jets 777-200ER 20 - 20 2 22 767-400ER 16 - 16 - 16 767-200ER 10 - 10 - 10 757-300 17 - 17 - 17 757-200 41 - 41 - 41 737-900ER * 10 10 20 18 38 737-900 12 - 12 - 12 737-800* 111 6 117 - 117 737-700 36 - 36 - 36 737-300** 47 (24) 23 (23) - 737-500** 55 (13) 42 (7) 35 Total Mainline 375 (21) 354 (10) 344 * Final mix of new 737-800/-900ERs are subject to change ** Final mix and quantity of 737-300 / 737-500 exits subject to change
This press release contains forward-looking statements that are not limited to historical facts, but reflect the company's current beliefs, expectations or intentions regarding future events. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. For examples of such risks and uncertainties, please see the risk factors set forth in the company's 2007 10-K and its other securities filings, including any amendments thereto, which identify important matters such as the consequences of the company's high leverage, the significant cost of aircraft fuel, delays in scheduled aircraft deliveries, its high labor and pension costs, service interruptions at one of its hub airports, disruptions to the operations of its regional operators, disruptions in its computer systems, and industry conditions, including the airline pricing environment, industry capacity decisions, industry consolidation, terrorist attacks, regulatory matters, excessive taxation, the availability and cost of insurance, public health threats, an economic downturn in the U.S. and global economies and the seasonal nature of the airline business. The company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this press release, except as required by applicable law.
Source: Continental Airlines
Thursday June 5, 7:00 am ET Sixty-seven mainline aircraft and 3,000 positions to be eliminated; CEO and President decline their salaries for the remainder of the year
HOUSTON, June 5 /PRNewswire-FirstCall/ -- Continental Airlines (NYSE: CAL - News) released to its more than 45,000 employees the following employee bulletin and message from Larry Kellner, chairman and chief executive officer, and Jeff Smisek, president. Continental does not anticipate any further comment until after it has had the opportunity to meet with employees during the next week.
ADVERTISEMENT
We've always said that you deserve open, honest and direct communication. This letter and the attached employee bulletin and Q&A are part of that commitment.
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. We need to make changes in response.
While there have been several successful fare increases, those increases haven't been sufficient to cover the rising cost of fuel. As fares increase, fewer customers will fly. As fewer customers fly, we will need to reduce our capacity to match the reduced demand. As we reduce our capacity, we will need fewer employees to operate the airline. Although these changes will be painful, we must adapt to the reality of today's market to successfully navigate these difficult times.
The attached employee bulletin and Q&A outline some of the steps we are taking to address this industry crisis. The situation for all airlines is serious, and the actions we are announcing today are necessary to secure our future. We regret the loss of jobs caused by this crisis, and we will do our best to minimize furloughs and involuntary terminations.
These actions will help Continental survive this crisis. You have our ongoing commitment to keep you informed as the industry evolves and adapts to these unprecedented challenges. It is important that we all keep our focus on working together during these difficult times.
Tony Jeff
Employee Bulletin No. 9
Continental today is announcing significant reductions in flying and staffing that are necessary for the company to further adjust to today's extremely high cost of fuel. 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.
The price of Gulf Coast jet fuel closed yesterday at $151.26 -- about 75 percent higher than what it was a year ago. At that price and at our current capacity, our fuel expense this year would be $2.3 billion more than it was last year. That increase alone amounts to about $50,000 per employee.
These record fuel costs have fundamentally shifted the economics of our business. At these fuel prices, a large number of our flights are losing money, and Continental needs to react to this changed marketplace.
Network Changes
Starting in September, at the conclusion of the peak summer season, Continental will reduce its flights, with fourth quarter domestic mainline departures to be down 16 percent year-over-year. This will result in a reduction of domestic mainline capacity (available seat miles, or ASMs) by 11 percent in the fourth quarter, compared to the same period last year.
By the end of next week, Continental will provide details on specific flights and destinations that are subject to reduction or elimination. For additional information on departures and capacity for 2008 and 2009, see Table A.
Co-worker Impact
As a result of the capacity reductions, Continental will need fewer co-workers worldwide to support the reduced flight schedule. About 3,000 positions, including management positions, will be eliminated through voluntary and involuntary separations, with the majority expected to be through voluntary programs.
The company will offer voluntary programs in an effort to reduce the number of co-workers who will be furloughed or involuntarily terminated due to the capacity cuts. Details of these programs will be available next week.
The reductions will take effect after the peak summer season, except for management and clerical reductions, which will begin sooner.
In recognition of the crisis and its effect on their co-workers, Larry and Jeff have declined their salaries for the remainder of the year and have declined any payment under the annual incentive program for 2008.
Fleet Changes
Continental will reduce the size of its fleet by removing the least efficient aircraft from its network. To accomplish this, Continental is accelerating the retirement of its Boeing 737-300 and 737-500 fleets. In the first six months of 2008, Continental removed six older aircraft from service. Continental will retire an additional 67 Boeing 737-300 and 737-500 aircraft, with 37 of these additional retirements occurring in 2008 and 30 in 2009. Given the need for prompt capacity reductions in today's environment, 27 of the 67 aircraft will be removed in September. By the end of 2009, all 737-300 aircraft will be retired from Continental's fleet.
Continental will continue to take delivery of new, fuel-efficient NextGen Boeing 737-800s and 737-900ERs. Overall fuel efficiency will improve measurably as Continental takes delivery of 16 of these aircraft in the second half of 2008 and 18 in 2009 and accelerates the retirement of the older, less fuel-efficient aircraft as mentioned previously.
By the end of the second quarter of 2008, Continental will operate 375 mainline aircraft. Taking into account both the accelerated retirements and scheduled deliveries, Continental's fleet count will shrink to 356 aircraft in September 2008 and 344 aircraft at the end of 2009 (see attached Table B).
TABLE A: Network Changes Departures Estimated Average Daily Departures and Year-over-Year Percent Change 3Q '08 4Q '08 FY 2009 Daily % Change Daily % Change % Change Depts. Depts. Mainline Domestic 831 (5.7%) 733 (16.0%) (9.8%) to (11.8%) Mainline International 298 0.7% 251 (4.1%) (1.1%) to 0.9% Mainline System 1,129 (4.1%) 984 (13.2%) (7.1%) to (9.1%) Regional 1,425 3.6% 1,287 (4.1%) (5.4%) to (7.4%) Consolidated 2,554 0.0% 2,271 (8.3%) (6.1%) to (8.1%) Available Seat Miles (ASMs) Estimated Year-over-Year Percent Change 3Q '08 4Q '08 FY 2009 Mainline Domestic (3.0%) (11.4%) (3.4%) to (5.4%) Mainline International 3.4% (1.6%) 0.0% to 2.0% Mainline System 0.1% (6.8%) (0.7%) to (2.7%) Regional 7.5% (1.5%) (7.4%) to (9.4%) Consolidated 0.9% (6.2%) (1.4%) to (3.4%) TABLE B: Continental Airlines Mainline Fleet Plan as of June 5, 2008 Net Net Total @ Changes Total @ Changes Total @ 6/30/08E 2H08E YE 2008E 2009E YE 2009E Mainline Jets 777-200ER 20 - 20 2 22 767-400ER 16 - 16 - 16 767-200ER 10 - 10 - 10 757-300 17 - 17 - 17 757-200 41 - 41 - 41 737-900ER * 10 10 20 18 38 737-900 12 - 12 - 12 737-800* 111 6 117 - 117 737-700 36 - 36 - 36 737-300** 47 (24) 23 (23) - 737-500** 55 (13) 42 (7) 35 Total Mainline 375 (21) 354 (10) 344 * Final mix of new 737-800/-900ERs are subject to change ** Final mix and quantity of 737-300 / 737-500 exits subject to change
This press release contains forward-looking statements that are not limited to historical facts, but reflect the company's current beliefs, expectations or intentions regarding future events. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. For examples of such risks and uncertainties, please see the risk factors set forth in the company's 2007 10-K and its other securities filings, including any amendments thereto, which identify important matters such as the consequences of the company's high leverage, the significant cost of aircraft fuel, delays in scheduled aircraft deliveries, its high labor and pension costs, service interruptions at one of its hub airports, disruptions to the operations of its regional operators, disruptions in its computer systems, and industry conditions, including the airline pricing environment, industry capacity decisions, industry consolidation, terrorist attacks, regulatory matters, excessive taxation, the availability and cost of insurance, public health threats, an economic downturn in the U.S. and global economies and the seasonal nature of the airline business. The company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this press release, except as required by applicable law.
Source: Continental Airlines
06-05-2008, 03:59 AM
#3
Gets Weekends Off
Joined APC: May 2006
Position: 737 CA
Posts: 2,575
Parking 67 older 737-300's and 500's over two years. Still getting 34 new 737-800 & 900's in next two years, plus 2 777's next year.
At the end of 2009 the fleet will have been reduced by 31 aircraft. Still not good, but could always be worse.
3,000 jobs also to be cut.
At the end of 2009 the fleet will have been reduced by 31 aircraft. Still not good, but could always be worse.
3,000 jobs also to be cut.
06-05-2008, 03:59 AM
#4
Chief Jeppesen Updater
Joined APC: Oct 2005
Position: Executive Transport Driver
Posts: 3,080
NEW YORK (Reuters) - Continental Airlines Inc (CAL.N) said on Thursday it would cut 3,000 jobs, or about 6.5 percent of its work force, and retire 67 older planes as it scales down in the face of soaring fuel prices.
The No. 4 carrier is the latest of the major U.S. airlines to announce large cutbacks as they grapple with unprecedented oil prices. On Tuesday, UAL Corp's (UAUA.O) United Airlines announced plans to slash jobs and flights, following a similar move by AMR Corp's (AMR.N) American Airlines last month.
Continental said it would cut 3,000 of its 45,000 staff, and retire 67 single-aisle Boeing (BA.N) 737 planes by the end of 2009, on top of the six planes it has already pulled out of service this year.
The airline said it would replace some of those older jets with deliveries of new, more fuel-efficient 737s. Its mainline fleet of about 375 planes would shrink to about 344 by the end of next year, an overall cut of about 8 percent.
It said it would cut flights after the summer season, reducing domestic capacity -- or the number of seats for sale on U.S. flights -- by about 11 percent in the fourth quarter.
(Reporting by Bill Rigby, editing by Maureen Bavdek)
The No. 4 carrier is the latest of the major U.S. airlines to announce large cutbacks as they grapple with unprecedented oil prices. On Tuesday, UAL Corp's (UAUA.O) United Airlines announced plans to slash jobs and flights, following a similar move by AMR Corp's (AMR.N) American Airlines last month.
Continental said it would cut 3,000 of its 45,000 staff, and retire 67 single-aisle Boeing (BA.N) 737 planes by the end of 2009, on top of the six planes it has already pulled out of service this year.
The airline said it would replace some of those older jets with deliveries of new, more fuel-efficient 737s. Its mainline fleet of about 375 planes would shrink to about 344 by the end of next year, an overall cut of about 8 percent.
It said it would cut flights after the summer season, reducing domestic capacity -- or the number of seats for sale on U.S. flights -- by about 11 percent in the fourth quarter.
(Reporting by Bill Rigby, editing by Maureen Bavdek)
06-05-2008, 04:04 AM
#5
Gets Weekends Off
Joined APC: Mar 2007
Position: 88B - Loud Pipes Save Lives
Posts: 1,597
Originally Posted by acl65pilot
Another great day for this industry.
Lets just hope that they are taking their old 737's and parking them. At least they have not deferred or canceled any of their orders.
Lets just hope that they are taking their old 737's and parking them. At least they have not deferred or canceled any of their orders.
Any ideas on if DAL is considering following suit? I know they claim by positioning ourselves early we are avoiding this but I don't know. Interesting to note that neither CAL or UAL is considering connection reductions on this round. To me, this will only increase their aggregate costs as you remove more efficient a/c (per pax) and retain less efficient a/c (RJ). The Captain I just flew with and I discussed this at length heading out to California the other day. We feel that the proverbial crap will hit the fan in the fall. The leisure traveller will still fly this summer but drop off a cliff come September. JBLU, AirTran, Frontier, Spirit I feel will really feel the hurt then. In the end, the "free market" will begin to go back to the regulated era of several mainline flights a day vs. 10x regional flights a day, fares will price out the low cost leisure traveller, the barrier to entry will be to high for upstarts, etc. We will see. My heart goes out to everyone right now.
06-05-2008, 04:41 AM
#8
Happy to be here
Joined APC: Jun 2006
Position: A-320A
Posts: 18,563
My take on DAL (Not to hijack this thread) is this. There is no way with DC-9's and MD-88 in the fleet that we will not be parking a ton of jets. The only way that we will not is this. Since everyone else has, we can keep our levels close to where they are. All we need is about 50-60 more per ticket in this environment. With 15% of the domestic capacity going away this fall, we will be able to charge a lot more for our tickets. In reality this is a shot in the dark. I really think that we need to follow suit. Our only saving grace is that we have moved so many airframes overseas that we have already trimmed a lot of our Fat.
What I am doing is this. Even though the market is horrible, I am getting the house ready to sell. I will put it on the market in the next 30 days. First by myself and then with a Realtor if things get ugly. I have a lot of equity so I can dump it if need be. They are saying about 12 months for house in my price range. (Not cheap, but not crazy expensive) I figure why not get some of those months out of the way while I still have income.
I have my resume updated and have been talking to a few companies on the corporate side of things. (BTW starting wages are more that I will make here as a 88CA) If the house sells, we are going to move to where I can find a job. There will be none here in Atlanta. When the offer for voluntary LOA's comes out, I will pull the trigger and go take one of these jobs and see where this all goes. Resigning seniority now is a dumb idea, as I think in the next ten years our QOL and wages will surpass those of the corporate world again making this the place to be.
What I am doing is this. Even though the market is horrible, I am getting the house ready to sell. I will put it on the market in the next 30 days. First by myself and then with a Realtor if things get ugly. I have a lot of equity so I can dump it if need be. They are saying about 12 months for house in my price range. (Not cheap, but not crazy expensive) I figure why not get some of those months out of the way while I still have income.
I have my resume updated and have been talking to a few companies on the corporate side of things. (BTW starting wages are more that I will make here as a 88CA) If the house sells, we are going to move to where I can find a job. There will be none here in Atlanta. When the offer for voluntary LOA's comes out, I will pull the trigger and go take one of these jobs and see where this all goes. Resigning seniority now is a dumb idea, as I think in the next ten years our QOL and wages will surpass those of the corporate world again making this the place to be.
06-05-2008, 04:42 AM
#9
Gets Weekends Off
Joined APC: May 2006
Position: 737 CA
Posts: 2,575
Originally Posted by dannolars
YIKES. I guess a couple of months in the pool at CAL were all I get now. Back to the drawing board... Good luck to all.
06-05-2008, 04:44 AM
#10
Gets Weekends Off
Joined APC: May 2006
Position: 737 CA
Posts: 2,575
Originally Posted by Mesabah
They are probably not cutting RJ's because business travelers still need the frequency.
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