Continental Cuts Hit Cleveland and Houston

A Continental Airlines Boeing 737-800 prepares to land at San Francisco International Airport, in this April 3, 2008 file photo. Continental Airlines' decision to cut staff, reduce the size of its fleet and drop many services will primarily affect its hubs at Cleveland and Houston and its mini-hub at Guam. The airline's services from Newark, Continental's primary international hub, will remain largely unaffected. Credit AP Photo/Noah Berger, file

NEW YORK (AP) — Travelers in Cleveland and Houston will be hit hardest when Continental Airlines starts cutting flights later this year in its fight against record fuel costs.

In a message to employees made public Thursday, the carrier said it will stop flying to 15 destinations and reduce service in several other markets as it sheds about 11 percent of mainline capacity starting in September.

Some of the cutbacks — timed to occur when travel normally drops off at summer's end — mean flights will be eliminated altogether. In other cases, Continental will swap smaller planes for larger ones.

More than half the seats Continental is taking out of the air will affect its hometown hub of Houston, where overall capacity will fall 7.9 percent. The city will remain Continental's second-busiest destination.

Cleveland will feel an even bigger sting. Although that hub accounts for a fraction of Houston's traffic, the cuts go deeper, with 13.1 per cent of capacity slated for elimination. Service to 24 cities will be affected by the change, including 10 routes that were part of a recent expansion.

Ricky Smith, director of the northern Ohio airport, said he was disappointed by the cutbacks but "pleased with efforts to minimize reductions."

Left relatively unscathed is Continental's biggest hub at Newark Liberty International, its main gateway to Europe and premier stronghold in the lucrative New York market. Overall capacity will decrease by just 3.2 percent, but the number of flights will be about the same as last fall.

'Fortress' hubs maintained

"They've kind of maintained the fortress hubs: Houston and Newark," independent airline consultant Robert Mann said. "It tells you that they're going to hang tough in places where there are big pools of revenue at stake."

The number of daily flights out of Houston will drop to about 560 from 640 during the fourth quarter last year, and to about 170 from 200 in Cleveland.

Continental is the only major carrier that maintains a hub at Cleveland Hopkins International, although all the major carriers or their regional affiliates offer some flights at the city-owned airport.

Carl Pulford, a passenger from Akron, Ohio, said the cuts were understandable, even though he was concerned about fewer direct flights and even more crowded planes.

"I can understand it, if they are facing very high fuel bills. You can't afford to do a full schedule," he said. "Just like the rest of us in cars, we have to change our driving habits, they have to change their flying habits."

Including fuel taxes and hedges, Continental predicted it will spend an average of $3.45 per gallon on fuel this year, up 58 percent from its average $2.18 per gallon fuel bill last year.

Nine smaller U.S. cities will lose Continental service altogether: Chattanooga, Tenn.; Green Bay, Wis.; Montgomery, Ala.; Oakland, Calif.; Palm Springs, Calif.; Reno, Nev.; Sarasota and Tallahassee, Fla.; and Toledo, Ohio.

"The financial performance of the flights, coupled with the high cost of fuel, have made the losses too great to continue service in those markets," spokeswoman Julie King said.

Continental will also cut more than a fifth of capacity at its small Pacific hub in Guam.

Affected international destinations

International destinations losing Continental service include Denpasar, Bali, Indonesia; Cali, Colombia; Cologne, Germany; Guayaquil, Ecuador; Monclova, Mexico; and Santiago, Dominican Republic.

Continental is one of several major airlines to call for sweeping service cutbacks in recent weeks. It first announced the changes last week, but did not say then which routes would be affected.

Smaller rival US Airways became the latest carrier to call for sweeping service cutbacks late Thursday, saying it would reduce domestic mainline capacity 6 to 8 percent and begin charging for additional fees for a first checked bag and nonalcoholic drinks during flights. United Airlines also said it would start charging a first-bag fee, something Continental has so far avoided.

Although it is generally seen as one of the healthiest network carriers, Continental is struggling along with other airlines to cope with rapidly rising fuel costs and a slumping economy. A number of industry observers say the current crisis is as bad as, if not worse than, the sharp downturn that followed the Sept. 11 attacks, which preceded a series of airline bankruptcy filings.

Some analysts have called on U.S. carriers to shrink by about 20 percent. By reducing capacity, airlines can save on fuel and labor costs, and are able to increase demand - pushing ticket prices higher.

Additional cutbacks possible

King did not rule out the possibility of additional cutbacks in the future.

"These actions are necessary to survive through these tough times and return to sustained profitability," she said.

About 3,000 job losses are expected as a result of the cutba cks. Continental said it believes most of the cuts will occur "through voluntary programs," which could include early retirement or temporary leaves of absence.

King said it was too early to say how many employees would voluntarily leave the company.

Workers who opt for the leave of absence would not be paid during the time off but would have access to medical and travel benefits for a certain period, and would be able to return to their jobs at the end of the leave. The length of the leave depends on job type and could last as long as 18 months.

The downsizing is expected to result in potentially large accounting charges to cover severance costs, canceled contracts and other expenses. In a filing with the Securities and Exchange Commission on Thursday, Continental said it "is not able at this time to estimate the amount and timing of these charges."

The carrier also said in the filing that it is "comfortable" with its forward bookings and expects dem and will "remain solid throughout the summer."

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