Company will reduce departures by 16 percent

A day after United announced big reductions in domestic capacity, Continental Airlines said it will reduce the number of domestic departures in its schedule by 16 percent in the fourth quarter, with an 11 percent reduction on domestic mainline capacity.

In a message to employees, Continental CEO Larry Kellner and president Jeff Smisek waned that “the airline industry is in a crisis. Its business model doesn’t work with the current price of fuel and the existing level of capacity.” They noted that several recent fare increases haven’t been enough to cover the rising fuel bills, and that as fares keep going up, more consumers will stop flying, forcing the company to reduce capacity. Already, they said, “a large number of our flights are losing money.” The capacity reduction will mean the loss of 3,000 jobs.

Continental plans to take 67aircraft out of its fleet, including all 737-300s and some 737-500s. The airline will eliminate 37 planes later this year and 30 more in 2009, replacing them with more fuel-efficient 737-800s and 737-900ERs. Continental said that by the end of next week, it will announce the specific routes that will be affected by the cutbacks. The company is already seeing a drop-off in domestic traffic, which was down 1.6 percent in the first five months of 2008, and down 4 percent just during the month of May. While most international routes were posting gains, Pacific traffic is down 4.2 percent so far this year, Continental said.