Continental said that they will raise baggage fees and cut 1,700 jobs following the large loss posted earlier this morning. The Houston-based carrier lost $213 million ($1.72 a share) amid weakened demand for travel. The carrier only lost $5 million a year earlier. Excluding the one-time charges, the loss was $169 million ($1.36 per share). Originally, analysts predicted an expected a loss of $1.35 per share excluding charges.
Continentals revenue fell 22.7 percent to just $3.13 billion – close with the on-target forecast of $3.14 from analysts.
The big cut in jobs will mean a 3.4 percent cut of Continental’s work force. A majority of those cuts will include reservations agents and flight attendants, as many are no longer needed due to the heavy cut in flights.
The fees you’re used to for flying Continental have… quadrupled in some cases. The old $5 fee for checking a bag on U.S. domestic flights has been raised to $20. Additionally, the carrier will follow other carriers, notably like to-be partner carriers United and US Airways, by adding an additional fee for those passengers that do not pre-pay when they check bags; that fee will be $30. Additionally, there will now be a $5 fee for booking reservations over the phone. Changes for flights begin August 19th. Continental expects to make $100 million a year from fees. Continental hinted that there may be more money-making fees in the near future.
Continental’s traffic (miles flown by paying passengers) figures fell 6.4 percent compared with last year’s second quarter. The airline, along with the regional carriers under Continental’s belt, cut capacity by 7.8 percent this quarter; just slightly helping load factor.
A big hit for Continental, among other carriers, was the swine flu outbreak in Mexico. The outbreak is expected to have cost Continental roughly $50 million in revenue.
Soon Continental will be leaving SkyTeam and will be joining the Star Alliance. They are expected to join the alliance on October 25, 2009. Additionally, the Department of Transportation recently approved antitrust immunity for the carrier, which will allow Continental to work closely with it’s new partners – including United and Lufthansa. I’m a little curious to see what role Continental will have with US Airways.
