Thursday, June 05, 2008

Continental Airlines to retire aircraft and eliminate thousands of jobs

Continental Airlines Boeing 757-200This month is beginning to remind me of a period earlier this spring, when it seemed that almost every day brought news of another air carrier going out of business. This month the recurrent theme among major carriers is capacity reduction, a process that entails retiring aircraft, trimming flight schedules, and cutting jobs.

Just yesterday I wrote about the United Airlines capacity reduction plan, and American Airlines made a similar announcement late last month. Today it is Continental Airlines that is making this kind of news.

In an Employee Bulletin issued earlier today, Continental announced that, starting in September, "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."

Then came the news dreaded by airline employees:
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.
To their credit, Continental's two top executives, CEO Larry Kellner and President Jeff Smisek, announced that they will decline their salaries for the remainder of the year and "have declined any payment under the annual incentive program for 2008." While unusual in the airline industry today, this gesture, though welcome, will do little to ease the pain for the thousands of front line workers facing unemployment in the near future.

Like American Airlines and United Airlines before it, Continental announced plans to retire a number of aircraft, removing the least efficient types from its all-Boeing fleet, namely all of its B737-300 aircraft and over 60% of its B737-500 types. Quoting again from the Employee Bulletin:
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.
The announcement added that the airline will continue to take delivery of new, fuel-efficient NextGen Boeing 737-800s and 737-900ERs. Continental took delivery of its first Boeing 737-900ER in January of this year.

Click here to read the full text of the Continental Airlines announcement, including the text of the Employee Bulletin, with tables summarizing the planned network and fleet changes.

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