Continental And Industry Fuel Costs

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Aug 20, 2002
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05/19/2004 - Updated 12:48 PM ET


Continental raises fares, expects losses because of fuel costs

HOUSTON, May 19, 2004 (AP WorldStream via COMTEX) -- Faced with soaring fuel prices, Continental Airlines Inc. is warning of hefty losses this year and beyond - plus possible employee furloughs and cuts to wages and benefits.

The carrier announced a worldwide fare hike late Tuesday designed to help offset an additional $700 million in fuel charges the airline said it was facing this year because of surging crude oil prices.

As a result, Continental said it no longer expects to break even in 2004 and could have a significant loss for the year because of the rising fuel costs coupled with low fares. The company is also predicting losses in the quarter ending June 30.

"We worked hard to generate $900 million of operating income improvements ... over the past two years," said Gordon Bethune, Continental's chairman and chief executive. He said the company had expected those moves would allow it to break even this year.

"While we may be faring better than our financially weaker competitors, none of us can afford to operate with these high fuel costs." he said.

Fort Worth-based American Airlines plans to match the fuel fare increase, chief executive Gerard Arpey said after Wednesday's shareholders meeting. But he acknowledged that doesn't mean the increase will stick. He said if other carriers don't go along, American may have to pull the increase back.

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

Continental said it would increase its fares $10 each way for flights under 1,600 kilometers (1,000 miles) and $20 each way for those over 1,600 kilometers. The increases are effective immediately. The higher fares will offset 15 percent to 20 percent of its fuel costs.

Bethune said that the company would have to seek "significant wage and benefit concessions and furloughs" to survive if the fare increases are not successful in buffering fuel costs.

Continental has about 41,000 employees.

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