Continental Airlines reported a second-quarter net loss of $213 million, widened from a $5 million deficit in the year-ago quarter, and announced it will cut 1,700 additional jobs "across the company" to mitigate the impact of "significant declines in high-yield traffic."
Speaking to analysts and reporters, CO executives said business passengers have "curtailed travel" or switched to economy-class tickets. Compounding the 27% year-over-year dip in premium tickets are demand-stimulating low fares on economy seats, President and COO Jeff Smisek said.
"Unfortunately, high load factors were driven by low fares and thus low yields," he explained. "It's clear right now that we're living on the back of strong leisure demand facilitated by low fares." He added that the drop in business passengers appears to have "stabilized," but "at a very low level."
Chairman and CEO Larry Kellner said CO will "make every effort to minimize the number of involuntary furloughs" but that cuts are needed owing to limited visibility on future demand, particularly in the fall, when leisure demand traditionally declines.
According to ATWOnline, the 1,700 job cuts, which will include management positions, are in addition to 500 reservation agent jobs that were eliminated and 700 flight attendant furloughs. CO also is adding $5 to checked-bag fees for passengers who don't pre-pay online and $5 to telephone booking fees.
Second-quarter revenue declined 22.7% year-over-year to $3.13 billion while expenses fell 20.3% to $3.28 billion including a 46.1% drop in fuel costs, producing an operating loss of $154 million, more than double an operating loss of $71 million last year. It recorded noncash impairment charges of $44 million largely related to impairment of values on certain 737 Classics.
Mainline traffic lowered 5.7% to 20.77 billion RPMs on a 7.3% dip in capacity to 24.96 billion ASMs, producing a load factor of 83.2%, up 1.5 points. Yield plunged 18.3% to 11.07 cents as RASM sank 15.2% to 10.59 cents and CASM decreased 12.9% to 10.85 cents. CASM excluding fuel and special charges dipped 1.5% to 7.69 cents.