In the latest round of big cutbacks at major airlines, Continental Airlines Inc. said it will slash about 3,000 jobs and significantly reduce domestic flights in its battle against soaring fuel prices.
"These actions will help Continental survive the crisis," said a letter to the company's 45,000 employees from Chairman and Chief Executive Larry Kellner and President Jeff Smisek. The two executives said they would also forgo incentive pay for the rest of 2008. The company declined to comment further.
Continental is decreasing capacity by 11%, beginning in September. The Houston-based airline will remove 67 airplanes by the end of 2009. Continental officials estimate fuel will cost the company an additional $2.3 billion more in 2008 than in the previous year.
Harlan Platt, a professor of finance at Northeastern University in Boston specializing in airlines, says he expects capacity and staff cuts to continue as oil prices rise. He says oil prices need to be at $70 a barrel for most airlines to break-even or begin making a profit.
"It's not a situation where the airlines will go bankrupt next month, but they have got to begin conserving their cash," Mr. Platt says.
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