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.
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 1,000 miles and $20 each way for those over 1,000 miles. The increases are effective immediately. The higher fares will offset 15 percent to 20 percent of its fuel costs.
In April, Houston-based Continental tried to raise a fuel surcharge that it adds to tickets from $20 to $30 per round trip for most travel within the United States and Canada. But it dropped the increase after rivals declined to match it.
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, with hubs in Cleveland, Houston and Newark, N.J.