Continental Airlines Inc. will cut 3,000 jobs and shrink its jet fleet by 18 percent, becoming the fourth major U.S. carrier to slash payrolls and flights as soaring fuel prices push the industry to its worst losses since Sept. 11.
"The airline industry is in a crisis," Chief Executive Officer Larry Kellner and President Jeff Smisek said in a memo to the Houston-based carrier's employees. "The actions we are announcing today are necessary to secure our future."
United Airlines, the second-largest U.S. carrier, said yesterday it was shutting its low-fare Ted brand and retiring 70 planes. United and Continental join American Airlines and Delta Air Lines Inc. in reducing flying after a 71 percent surge in fuel over the past year.
"These guys are biting the bullet," CreditSights Inc. debt analyst Roger King said of Continental. "There's only so much cash and the fuel bills are going up much faster than the fares."
Continental, the fourth-largest U.S. airline, will seek volunteers to give up their jobs before dismissing employees to cut 6.6 percent of its workforce. It is grounding 67 planes from a main jet fleet of 375 aircraft.
Job cuts and buyouts announced within the past two months at UAL Corp.'s United, Delta and Continental total 7,600. AMR Corp.'s American, the world's largest airline, said May 21 it would trim its payroll by "thousands" without giving a figure.
Programs to encourage voluntary employee departures will be detailed next week, Continental said. Kellner and Smisek said they would forgo their salaries and bonuses for the rest of the year.
Continental gained 83 cents, or 5.7 percent, to $15.33 at 9:51 a.m. in New York Stock Exchange composite trading. The shares tumbled 35 percent this year before today.
At current prices, Continental's fuel bill will rise $2.3 billion above 2007's spending, or about $50,000 more per employee, the company said.
Jet-fuel costs have surpassed labor as the biggest expense for most U.S. airlines. JPMorgan Chase & Co. analyst Jamie Baker has estimated a record $7.2 billion industrywide loss for 2008, topping the annual deficits posted after the Sept. 11, 2001, terrorist attacks.
"After 9/11, demand fell off," King, who is based in New York, said in an interview. "Now the planes are pretty full, but the fares are nowhere near high enough to cover fuel. And we don't know where oil's going to go."
Continental said most of its job cuts will occur after the peak U.S. summer travel season, except for management and clerical positions, which will begin sooner.
Continental will pull all Boeing Co. 737-300 jets, its oldest and least fuel efficient, from its 372-plane fleet by the end of 2009. It also is speeding the retirement of 737-500s. The changes are on top of six older planes parked earlier this year.
Today's moves marked the third time in 2008 that Continental has slowed expansion plans. By the fourth quarter, the airline will have reduced daily departures by its main jet fleet by 16 percent. Further details on schedule changes will be provided next week, Continental said.
In April, Continental said it was reducing U.S. capacity by about 5 percent and grounding 14 planes. The airline also said it would trim flying at its regional partners. Earlier, Continental said it would stop flying 34 jets.
United's retrenchment is the industry's deepest so far, with U.S. seating capacity targeted to fall 18 percent by the end of 2009. That goes beyond the 12 percent reduction planned by American and the 11 percent goal of Delta, the third-biggest U.S. carrier by traffic.
Airlines have focused reductions on U.S. flying because they can charge higher fares on international routes, where they don't face discount competition. Still, fuel-price pressure spurred United to say it also would trim overseas service.