Plunging oil prices and capacity cuts by U.S. airlines have positioned Continental Airlines well to survive the current recession, an executive for the carrier said Tuesday.
Continental Treasurer Gerry Laderman, speaking at an investors conference in New York, declined to offer a forecast for next year. But he said the airline is comfortable with its domestic bookings for December.
He said average occupancy on December flights would be flat to slightly higher than a year ago. Capacity cuts and a late Thanksgiving that pushed some return flights into December have boosted the projected outcome for December, he said.
First-class and business international traffic have tapered somewhat, Laderman told the Credit Suisse-sponsored conference. Continental generally has higher profit margins on international routes than on domestic ones.
Continental said that international flights now account for 50 percent of its total seats, up from 42 percent in 2004. International capacity among United States carriers as a whole is 39 percent.
The airline outlined its four hubs to investors, identifying its Newark, N.J., hub as “the world’s largest market”; Houston as the third-largest U.S. hub, with optimal connections to Latin America and the United States; Cleveland, as a Midwest hub providing service to more than 60 destinations; and Guam, the jumping-off point for more flights in the Pacific region than any other U.S. carrier.
Continental on Monday said it reduced capacity by 7.3 percent in November compared with a year earlier. But passenger traffic declined even more – by 10.5 percent.
The decline showed up in the airline’s “load factor,” or how full planes were. Its consolidated load factor, looking at both mainline and regional jets, was 77.3 percent in November, 2.8 points below the consolidated load factor a year earlier.
Airlines figure that reducing capacity will increase demand for airline seats and allow them to push up ticket prices. But the soft economy is making that goal elusive for now.
Continental estimated that its passenger revenue per available seat mile increased just 1 percent to 2 percent compared with November 2007.
“The cuts couldn’t keep pace with the reduced demand” from a lackluster business climate and families reining in discretionary travel, industry consultant John LaCosta said.
Continental plans to take delivery next year of 14 new models of Boeing’s 737 aircraft and in 2010, to add 12 Boeing 737s, two Boeing 777s and two Boeing 787s. As part of the agreement in principle, Continental arranged to have backstop financing available for all aircraft scheduled for delivery in 2009, Laderman said.