NYTimes.com Article: Continental Is Raising Fares to Offset Surging Fuel Costs

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Continental Is Raising Fares to Offset Surging Fuel Costs

May 19, 2004





HOUSTON, May 18 (AP) - Continental Airlines is raising its
fares to offset surging fuel costs and said Tuesday that it
would be forced to consider wage and benefit cuts, plus
employee furloughs, if the higher fares did not help
company finances.

Because of rising fuel costs and what it termed a weak fare
environment, Continental said it no longer expected to
break even in 2004 and could have a significant loss for
the year. The company is predicting losses in the quarter
ending June 30.

Continental said it would increase its fares $10 each way
for flights under 1,000 miles and $20 each way for those
over 1,000 miles. The increases are effective immediately.

Continental said it expected the new fares to offset 15
percent to 20 percent of its fuel costs.

In April, Continental, which is based in Houston, tried to
raise a fuel surcharge that it adds to tickets to $30 from
$20 per round trip for most travel within the United States
and Canada. But it dropped the increase after rivals
declined to match it.

Gordon M. Bethune, Continental's chairman and chief
executive, said in a news release Tuesday night that the
company would have to seek "significant wage and benefit
concessions and furloughs" to survive if the fare increases
were not successful in buffering fuel costs.

Continental has about 41,000 employees, with hubs in
Cleveland, Houston and Newark.

Continental had projected 2004 fuel costs would be 68 cents
a gallon, but current prices are $1.14 a gallon, which
could result in an additional $700 million in company
operating expenses.

Although Continental expects to end the second quarter with
an unrestricted cash and short-term investment balance of
$1.5 billion to $1.6 billion, the company said it expected
to post a loss for the quarter ending June 30, as well as
2004 and beyond.

The company is also looking at whether to fund its pension
program above the $17 million minimum required for 2004.
The company is expected to apply for deficit reduction
contribution relief under the newly passed Pension Funding
Equity Act.

http://www.nytimes.com/2004/05/19/business/19air.html?ex=1085973557&ei=1&en=8d28e28e615fbdda


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