Continental warns of 'tough decisions'
Continental Airlines CEO Larry Kellner strongly hinted Friday that some big changes in the way the airline is operating may have to be made soon if high oil prices persist.
Airlines for months have been raising fares to try to offset the high prices. Another increase of as much as $50 on round-trip tickets was put in place by United Airlines and matched Friday by Continental.
But more may have to be done, the chairman and chief executive of Houston-based Continental said Friday.
Kellner told employees in a taped message that at today's fuel prices, the carrier will pay about $1.5 billion more for fuel in 2008 than it did last year.
"We can absorb these extraordinary high fuel prices for a little while," maybe a few months, Kellner said. "But if these prices continue, we will have to make some tough decisions to make sure the size of our network is right for a world with fuel at such astronomical rates."
At least one other airline signaled Friday that changes may be on the way because of high oil prices. At Atlanta-based Delta Airlines, Chief Executive Richard Anderson told employees it will be rolling out a comprehensive plan next week.
That carrier already has made some cuts domestically, he noted.
"Do everything you can to preserve fuel," Anderson told the Delta workers in his own taped message.
Kellner told employees the carrier would not ask for more cuts and concessions, as it did a few years ago.
However, "we'll all have to work together to increase revenues and decrease costs," if oil remains high.
Whatever steps may be taken, Continental pilots, who rallied this week in New York City to draw attention to their contract negotiations with management, will make sure their interests are protected, spokesman Mark Adams said Friday.
"This was the theme of our rally," Adams said. "Fuel costs what fuel costs and pilots cost what pilots cost and sometime you have to raise the fare for both."
Friday's fare increase by United and matched by Continental had not been matched by other big carriers, but Rick Seaney of FareCompare.com said he didn't find that surprising.
"Airlines along with consumers are probably absorbing the impact of this jolt and it may take them a few days to decide on proper levels of matching," Seaney said in a report. "Most likely they will match."
The $50 hike was only for the longest flights, with the increases for shorter trips starting at $4 a round-trip, he said.
To stay in place, fare increases need all major airlines to participate. If only one chooses not to raise prices, the attempt usually collapses.
Airlines have raised fares at least six times in the past three months as oil and fuel prices have continued to rise. The price for a barrel of West Texas crude closed at more than $110 a barrel Friday.
