Continental to downsize

The American air carrier Continental Airlines will be cutting down its operations significantly. The airline has recently announced that no less than 67 of its aircraft will be grounded and 3,000 staff will be laid off. All this is in response to unprecedented fuel costs, that many industry insiders say is undermining the entire aviation business model.

Over 45,000 employees received a letter from Chief executive officer Jeff Smisek and chairman Larry Kellner that said, “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 in the marketplace. We need to make changes in response.

The price of Gulf Coast jet fuel closed yesterday at $151.26 - about 75 percent higher than what it was a year ago. At that price and at our current capacity, our fuel expense this year would be $2.3 billion more than it was last year. That increase alone amounts to about $50,000 per employee.”

It would seem that this type of rhetoric will be echoed as others airlines cut costs to cope with the price of fuel.