Earlier this morning, Continental Airlines (NYSE: CAL) announced that it will cut 1,700 jobs, along with raising fees for checking luggage. CAL tagged this news along with its quarterly earnings report, in which it reported a loss of $1.72 per share. In the same quarter a year ago CAL lost a nickel per share. Excluding one-time items, CAL lost $1.36 per share compared to estimates for a loss of $1.35 per share. Quarterly revenue slipped 22.7% to $3.13 billion in the quarter, just shy of the consensus estimate.
Back to the job cuts and higher fees ... CAL will be cutting roughly 3.4% of its workforce. These cuts will be added to plans to eliminate 500 reservations agents and to put 700 flight attendants on leave. As for the charges, CAL is upping the fees for checking bags on U.S. flights by $5. It will now cost $20 to check the first bag and $30 for a second bag for passengers who check their bags at the airport rather than online. this change will be effective immediately for flights on or after August 19. In addition, the air carrier will add $5 to the fee for booking a reservation over the phone. CAL hinted that there would be more "revenue-raising measures" coming.
Here is my issue: with fees like these taking place the passenger has to pay more and more for what could end up being less service. CAL is now cutting a total of 2,900 jobs, with some coming from reservations and some flight attendants. This means less service and higher fees. I don't know about you, but I think that this isn't necessarily a formula for higher profits. Let's make people pay more to check their luggage and then take away reservation assistants and flight attendants. Paying more for less service isn't a formula for success, and the airline industry needs some help. With CAL wallowing at multi-year lows, this isn't the kind of news that the firm needs to announce.
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Reader Comments (Page 1 of 1)
7-21-2009 @ 3:55PM
Jamie said...
Continental has tried for some time to hold the line on service offerings as a way of boosting profits. For instance, many people either forget or do not know that CAL is the only airline that still serves complimentary meals in Coach.
CAL is raising baggage fees because it initially kept them lower than competing carriers. Superior service has always done this airline a lot of good, but the fact is, only business travelers really notice or care. Time and again, leisure travelers have demonstrated that they'd rather flock to the cheapest tickets possible, and when they're the only ones flying, why take a loss to give them something that they ignore anyway?