Continental Airlines Holdings Inc., citing dramatic jumps in fuel costs and a heavy debt, filed for Chapter 11 bankruptcy protection Monday, the second such filing for the company in seven years.
Houston-based Continental Airlines, which filed for bankruptcy in Wilmington, Del., pledged no disruption of service but also announced it would sell its Seattle-Tacoma to Tokyo route to American Airlines for $150 million.Continental joined Eastern Airlines in Chapter 11 by filing for bankruptcy a little more than a month after strongly denying that skyrocketing fuel costs would prompt a second Chapter 11 filing.
"We enter Chapter 11 by necessity," said Continental Chairman Hollis Harris. "It has temporarily alleviated our debt problem and will help us cope with high fuel costs."
Continental spokesman Ned Walker described the 125 percent increase in jet fuel costs as an "unprecedented crisis" for the airline industry. The fuel hike primarily has been blamed on the situation in the Persian Gulf.
Continental said it expects to pay $1.1 billion for fuel this year, about $231 million more than it would have paid had the Persian Gulf crisis not occurred, Harris said.
The Chapter 11 filing will give Continental, the fifth-largest U.S. air carrier, protection from creditors while the company restructures its debt and implements a plan to pay creditors.
Continental has carried about $2.2 billion in debt - about $1.7 billion of which is secured - plus nearly $4 billion in aircraft operating leases not included in its balance sheet.
The airline has been unable to meet its debt repayment schedule. The debt primarily accumulated from the mergers of New York Air, Frontier Airlines and People Express with Continental, the company said.
"Continental will continue full flight schedules. We are confident that there will be no need for layoffs, pay cuts or reductions in benefits," Harris said.
Continental has 37,000 employees.
"For our customers, it will be a regular business day," Walker said.
No impact in S.L.
Continental Airlines' Chapter 11 bankruptcy filing should have no impact on its Salt Lake operation.
"It's not going to mean a thing," said Salt Lake general manager Al Miller on Monday. "Quite honestly, it's going to help the airline meet its debts and obligation to its customers and creditors."
The carrier offers six flights daily from Salt Lake City to Denver's Stapleton International Airport, one of its major hubs. The Salt Lake operation employs about 60 people.
"We anticipate everything's going to be business as usual," Miller said.