The company said it would not be more specific about the cuts until it has talked to its employees over the next week.
In a bulletin to employees Thursday, company chairman Lawrence Kellner and president Jeff Smisek said several recent fare increases have not covered the rising cost of fuel, which, the executives said, was 75 percent higher than a year ago, raising 2008 fuel expense by $2.3 billion compared with last year.
“These record fuel costs have fundamentally shifted the economics of our business,” the executives said in the bulletin. “At these fuel prices, a large number of our flights are losing money, and Continental needs to react to this changed marketplace.”
Cleveland airports director Ricky Smith said the city-run airport will be examining its operations to reduce costs. Continental, as the largest carrier at Hopkins, ultimately pays a large portion of the airport’s operating costs. Smith said Continental carries 60 percent to 65 percent of the passengers who move through Cleveland Hopkins Airport.
Continental has more than 5,000 employees in the Cleveland area, Smith said.
Because the airline has not offered any airport-specific details, Smith said he could not be more precise about how Continental’s plans will affect Cleveland operations.
However, Smith suggested that if Continental maintains its strategy of shifting flights out of its busy hub at Newark Liberty International Airport in New Jersey, the impact on Cleveland Hopkins could be mitigated.
Last September, Continental announced that it would spend $70 million to expand its operations at Cleveland Hopkins by 40 percent, creating 700 jobs and adding 70 new flights during 2008.
While Smith said at the news conference that he would be surprised if there is no local impact on their expansion, he later told Crain’s Cleveland Business that the strategy behind the expansion plan was to move passengers out of the Newark airport to Cleveland, where delays are shorter. That’s important, because airplanes burn increasingly expensive fuel needlessly waiting to take off and land at the congested Newark hub.
Another factor in Cleveland’s favor is that the largest portion of Continental’s cuts will come from its so-called mainline business—the large jets that fly between the airline’s hubs in Newark, Cleveland and Houston and to other major cities. However, the majority of Continental passengers through Cleveland travel on smaller regional jets that connect with cities such as Indianapolis and Albany, New York.
According to the Continental bulletin to employees, mainline domestic flights will be cut by 16 percent, while regional traffic is planned to be cut only 4.1 percent.This story was originally filed by Jay Miller of Crain’s Cleveland Business, a sister publication of Workforce Management. To comment, e-mail firstname.lastname@example.org.