Continental to Cut Jobs…Capacity
by: Pat Hernandez, June 5, 2008 6:06:54 am
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Soaring fuel prices claim another casualty in the airline industry. Houston-based Continental Airlines says it's reducing its work force capacity. Analysts say the move signals a discipline for the industry in order to survive. Pat Hernandez has the story.
Continental is cutting 3-thousand jobs and taking 67 planes out of service. The company says its two executives will not take salaries or incentive pay for the rest of the year. Record high jet fuel prices have nearly doubled in the past year, and it forced Continental to post a loss of 80-million dollars in the first quarter. Despite being the healthiest of the six big network carriers, securities analyst Ray Neidl says it didn't make it immune to cuts.
"The industry has to reduce capacity probably by up to 20-percent, or over 20-percent in an environment where oil has tripled over the past couple of years. By not reducing capacity you'd be irresponsible to what's happening in the industry. The other alternative would be for somebody to go out of business to take that capacity out."
University of Houston economics professor Barton Smith says for the Houston economy the announcement is not devastating and calls the move by Continental bullish.
"I think it is a good move in a variety of ways. It's going to help them reduce their costs in an environment in which jet fuel is very very expensive right now, but as all of these companies start to reduce their number of flights, it's going to take some of the pressure off of jet fuel as well."
But UH law professor Darren Bush doubts the action by the airline industry will do little to change fuel prices:
"I think that if oil prices continue to be as high as they are now and jet fuel prices continue to be as high as they are now, you're going to see more cuts, you're going to see more rethinking of Continental's business plan, and you're going to see perhaps increased service type charges. You will certainly see increased fares. Flying as you currently know and love it will be dramatically different if jet fuel prices continue to be as high as they are now."
The City of Houston released a statement that stated there are no plans to delay the expansion of terminal-b at Bush, which the city is in partnership with Continental.
Pat Hernandez. KUHF- Houston Public Radio News.