Continental Moves To Increase Fees, Tighten Operations

Continental Airlines today moved to gain aggressive cost savings with a plan to reduce flights, immediately enforce a $20 fee for all domestic paper tickets, add new and additional fees for services selected by low-fare customers, begin "rigid enforcement" of fare rules and eliminate discounts on some published and unpublished low-fare categories. The changes will be implemented over the next few weeks.

The airline joins United and American airlines in levying the $20 surcharge on domestic paper tickets. Delta Air Lines in May stopped issuing paper tickets for e-ticket-capable itineraries, but those tickets can be converted to paper for a $10 fee at reservations centers and airport ticket counters. SkyMiles Medallion members and holders of full fare tickets are exempt. Northwest assesses a $10 surcharge for customers flying on leisure fares only.

Continental's domestic jet fleet next year will be reduced by 4 percent year over year, in addition to the 6.5 percent reduction already made this year.

"We need to do some aggressive belt-tightening so we don't end up like them," said Continental chairman and CEO Gordon Bethune, referring to the bankruptcy of US Airways and "likely" bankruptcy of United Airlines. Bethune added that Continental will "be forced to make further changes in every aspect of our operation" should market conditions remain stagnant.

In a letter issued to travel agencies, the airline said the initiative is part of an ongoing effort to "better define what the customer wants and"--using the same terminology as American Airlines last week when announcing its own capacity cuts--"is willing to pay for."

Agencies also will contend with a $25 administrative debit memo for any incorrectly reported U.S. taxes and fees and a $25 service fee for any debit memo issued that is not a flat fee or "administrative in nature."

The airline expects the changes to bring in about $350 million annually, and about $80 million this year. For the second quarter, Continental reported a loss of $139 million.