This NY Times article reports on Houston-based Continental Airlines‘ plan to respond to the recent spike in fuel prices that are straining profits of all airlines. Fuel is the second-biggest expense for airlines, after labor costs, and typically totals about 10% of operating costs.
Continental raised fares across the board late yesterday and said it will have to consider furloughs and wage cuts if jet-fuel prices do not decline from their current record levels. Continental raised ticket prices $10 each way for flights of as much as 1,000 miles, and $20 each way for longer trips. However, under heavy pressure from discount airlines, major carriers such as Continental have seen previous attempts to boost ticket prices fail when competitors decline to match. Even if this current increase sticks, Continental said it would offset only 15% of its higher fuel tab.
At current prices for oil, Continental faces an additional $700 million in annual operating expense over what it originally had planned for 2004. As a result, Continental CEO Gordon Bethune said he expects Continental to suffer a significant loss for 2004.