Continental wants to fly to Shanghai
Loss-making airline targets booming Chinese market amid intense domestic competition, high fuel costs.
March 3, 2006: 9:01 AM
HONG KONG (Reuters) - Continental Airlines Inc., battling low-cost carrier competition in its domestic markets and high fuel costs, hopes to launch a flight to Shanghai next March if it receives approval from the U.S. government.
Loss-making Continental (Research), which won U.S. government approval a year ago to offer flights to China, hopes to increase its presence in the country where runaway economic growth is fueling passenger demand, but has no plans to follow a budget airline model, Asia Pacific President Mark Erwin told reporters Friday.
"We don't believe that we need to be the cheapest out there," Erwin said.
"We can take so much cheese off the pizza, people won't buy the pizza," he said, adding that the Asia Pacific region makes up about 8 percent of Continental's total revenue.
Asia's low-cost airline industry has begun to take off, with Qantas Airways discount affiliate Jetstar Asia and AirAsia Bhd trying to emulate their U.S. peers.
Erwin added that it is Continental's goal to return to profitability in fiscal 2006, but he declined to say when the company might see a turnaround.
Soaring oil prices were Houston-based Continental's main challenge, Erwin said. Fuel costs made up 24 percent of Continental's total costs in the fourth quarter of 2005.
For each $1 change in the oil price, Continental had to pay $42 million annually, Erwin said, adding that the company paid $1 billion in fuel costs last year.
Continental applied to the U.S. Department of Transportation to launch direct flights between New York and Shanghai, but it has yet to receive approval, company officials said.
Wing and a prayer
The beleaguered U.S. airline industry has been battered by soaring fuel costs and low-fare competition, with rivals Northwest Airlines Corp. and Delta Air Lines Inc. filing for bankruptcy in September.
Continental is also aggressively cutting down on expenditures and saved $1.1 billion last year, Erwin said. The company hopes to save another $200 million this fiscal year through measures such as paperless tickets.
Low-fare competition has also caused major U.S. airlines to shift their focus to international routes where competition is less intense.
Continental has operated flights between Hong Kong and New York since 2001 and has run direct flights between Newark and Beijing since June.