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Continental gets in line to cut cost, boost revenue
<http://cbs.marketwatch.com/news/default.asp?siteid=excite&dist=excite>
CBS Marketwatch.com - The story behind the numbers
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By Jennifer Waters, CBS.MarketWatch.com
Last Update: 12:02 PM ET Aug 20, 2002
HOUSTON (CBS.MW) -- Continental Airlines is cutting capacity by 17
percent immediately as part of a restructuring aimed at saving $350
million annually.
In response to "dramatic changes in the marketplace," Chief Executive
Gordon Bethune said the carrier will slash costs and raise revenue
through a combination of initiatives that results in the largest
capacity cuts in the industry.
Investors embraced the news, pushing shares of the carrier up 7 percent
within minutes of the announcement. In recent action, shares were
changing hands at $9.25, up nearly 11 percent, or 88 cents.
Continental (
<http://money.excite.com/jsp/qt/full.jsp?symbol_search_text=CAL> CAL:
<http://money.excite.com/jsp/nw/newsheadlinebysymbol.jsp?symbol_search_t
ext=CAL> news) is taking out the capacity this month -- considered the
peak month for domestic flying -- and will reduce mainline jet capacity
by about 4 percent for the rest of this year. That decrease comes on top
of a 6.5 percent drop this year over last year. Continental expects to
save $80 million throughout the rest of the year.
The company said it will attempt to avoid more layoffs through a hiring
freeze, retirement, voluntary leaves and attrition.
Bethune also laid out a number of other steps as part of 100 Continental
changes. Among them: getting rid of 11 MD-80 aircraft from the schedule
by the end of next year, immediately assessing a $20 fee for all
domestic paper tickets from all points of sale, tacking on new and
additional fees for selected services on low-fare routes, eliminating
discounts on certain published and unpublished low-fare categories,
rigidly enforcing fare rules and creating a strict policy against
waivers as well as "a disciplined adherence" to collecting charges for
excess baggage and change fees.
Continental also said it would rebid many supplier contracts and would
modify certain employee programs.
Bethune said he was responding to last week's flurry of airline news in
which US Airways filed for Chapter 11 protection, UAL said it was
preparing bankruptcy proceedings just in case and AMR said it would hand
out pink slips to 7,000 employees as part of a major restructuring.
"We need to do some aggressive belt-tightening so we don't end up like
them," Bethune said in a statement. "We're taking action both internally
and externally, and all the steps we're taking today are necessary.
Unless market conditions improve quickly, we'll be forced to make
further changes in every aspect of our operation."
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