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CAL
Topic Author
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Continental, Whats Next?

Sat Feb 26, 2005 3:09 am

Well we all know that management has requested pay cuts from all the employee groups at Continental. So far all of the non-unionized groups have been told what their pay cut will be and that it will take effect on Feb 28th. The unionized groups (Pilots, Flight Attendants, Dispatchers and Maintenance) have still not voted on any cuts. The Flight Attendant union has said that it will be impossible to get the group to approval by the 28th. Also there has been no formal “this is exactly how much we are asking for” info given to Flight Attendants or any other union group as far as I know.

Headquarters has said very clearly that there are 2 ways for Continental to survive.

1. – Continental continues to expand and serve more international destinations. Gets new planes, etc etc etc… To do this however they must have the pay cuts.

2. Continental will have to go down the same path as other U.S. carriers and shrink its capacity. Remove certain aircraft from its fleet and basically shrink to profitability.

All of the Union groups know and understand that we are going to have to take pay cuts. But if the company had that deadline of Feb 28th then they should have been talking with the unionized groups much earlier. The company did not even sit down with the Flight attendant group until mid JAN. IMOH way to late!

Also we know that the date of FEB 28th is when the board will approve the 787’s. or will they???

So what do you all think is going to happen. What are your opinions and thought.

What is going to happen at Continental Airlines.. … I guess only time will tell but what’s your prediction.


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ANCFlyer
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RE: Continental, Whats Next?

Sat Feb 26, 2005 3:25 am

I will watch carefully since CO is my carrier of choice. CO has done miraculous things in the past, and I suspect, even with new leadership, it will continue to do so.

Cheers to CO and it's folks!
FOR THOSE THAT FOUGHT FOR IT, FREEDOM HAS A FLAVOR THE PROTECTED WILL NEVER KNOW OR UNDERSTAND
 
NYC777
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RE: Continental, Whats Next?

Sat Feb 26, 2005 3:29 am

I, for one think they'll approve the 787. Their financial situation will improve and the 787 will open up international routes which is probably the only source of profitability for an US-based airline.

The unions have their own number crunchers looking at CO's B/S, Income Statement and cash flow (most importantly) but they also see what's been happening to the other legacy carrier so they'll want to make a deal sooner as CO is not in as bad a financial condition as the other legacies are. The point being is that CO doesn't want to end up a DL, US, or a UA.
That which does not kill me makes me stronger.
 
corey07850
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RE: Continental, Whats Next?

Sat Feb 26, 2005 3:30 am

CO is doing this in almost a "gentlemanly" fashion... They are working hard to talk to the unions and see what can be worked out... It's not so much a "doom and gloom" picture as it is at other airlines. And while they are asking for pay cuts, they are still keeping other benefits alive such as scholarship funds for employees and their families. While 2/28 is pretty impossible to have everything settled, I am confident they will achieve their goals.
 
DAYflyer
Posts: 3546
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RE: Continental, Whats Next?

Sat Feb 26, 2005 3:42 am

I hope they survive all of this turmoil. I love CO and fly them every chance I get. They are smart, aggressive and quicker on their feet than DL, AA, UA or US, so I think the chances are good that they will be aroundd for a long time.
One Nation Under God
 
CAL
Topic Author
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RE: Continental, Whats Next?

Sat Feb 26, 2005 3:46 am

Quoting Corey07850 (reply 3):
While 2/28 is pretty impossible to have everything settled, I am confident they will achieve their goals


I agree the union groups will give up stuff I just think its impossible for that to happen by the 28th.


Quoting DAYflyer (reply 4):
chances are good that they will be aroundd for a long time.


CO will be here just worried about in what capacity.
 
CAL
Topic Author
Posts: 458
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RE: Continental, Whats Next?

Sat Feb 26, 2005 8:33 am

This is the video that Continental put out for the employee groups what do you think.
http://www.imagesource.tv/coairvideo/pnbreductions.asx
 
AA737-823
Posts: 5499
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RE: Continental, Whats Next?

Sat Feb 26, 2005 10:52 am

Wow, that video was great... proffesional and informative.
I like the profit sharing idea- Southwest does it...
But then, I am not a Continental employee.

PLEASE approve the 787 purchase. As a Continental passenger, I will choose your airline over others if you offer me the 787.

Good luck, CO.
 
FriendlySkies
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RE: Continental, Whats Next?

Sat Feb 26, 2005 10:57 am

Quoting AA737-823 (reply 7):
PLEASE approve the 787 purchase. As a Continental passenger, I will choose your airline over others if you offer me the 787.


Unfortunately, the board doesn't care...
 
sllevin
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RE: Continental, Whats Next?

Sat Feb 26, 2005 11:16 am

This is why unions are important. Otherwise, as a worker, expect to make nothing. Divide and conquer is still going strong.

Steve
 
avek00
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RE: Continental, Whats Next?

Sat Feb 26, 2005 11:21 am

"This is why unions are important. Otherwise, as a worker, expect to make nothing. Divide and conquer is still going strong."

I agree generally, but such a rationale will get you nowhere vis-a-vis CO - their nonunion emps wouldn't trade places with the union folks at other airlines who have taken deeper pay cuts PLUS pension loss for anything.
Live life to the fullest.
 
avroarrow
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RE: Continental, Whats Next?

Sat Feb 26, 2005 11:32 am

Hmmm my family and I are booked to fly CO BUF - LAS return at the end of April. Wonder if I should start getting nervous about labor actions/flight cancellations or a decline in service if the cuts are done by then?
Give me a mile of road and I can take you a mile. Give me a mile of runway and I can show you the world.
 
AeroWesty
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RE: Continental, Whats Next?

Sat Feb 26, 2005 11:47 am

Great video, and thanks for sharing it. I'm glad they explained the cost of fuel hedging, and that you can take a loss on it, but I was surprised they didn't even spend a moment on the currency losses further international expansion could bring about if the dollar continues to decline, or how much of a loss they've taken in the past year, if any, on currency transactions.

Cheers.
International Homo of Mystery
 
CAL
Topic Author
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RE: Continental, Whats Next?

Sat Feb 26, 2005 11:49 am

AvroArrow, seriously you have nothing to worry about nothing will change that quick, it will take a long time before " labor actions/flight cancellations"

That kind stuff is not even an option for unions at continental, their not crazy.
 
avroarrow
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RE: Continental, Whats Next?

Sat Feb 26, 2005 11:56 am

Thanks CAL. I have to confess a pretty much complete ignorance of CO's internal workings. I didn't mean to imply that CO staff might be a bunch of hot-heads and it is good to hear that they don't appear to be. I've never flown CO before and I am looking forward to it.
Give me a mile of road and I can take you a mile. Give me a mile of runway and I can show you the world.
 
PapaNovember
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RE: Continental, Whats Next?

Sat Feb 26, 2005 11:59 am

Thanks CAL for the link to the video. I don't know if non-employees were supposed to have access to it, but as a non-employee I will say this - It seemed somewhat insincere. I already can't remember the CEO's name but his tone seemed pretty condescending to me. I would think if I was asking/telling my employees that a reduction in pay, benefits and a change in work rules was absolutely necessary for "our" companies survival, I would be speaking much more empathetically. Maybe he just rehearsed his lines too much to seem genuinely concerned.

Also, I'm curious where these $1.1 billion in cost saving initiatives were found. Employees of Continental probably know, but were this really a State of the Company address, presented to the board of directors, I would expect it to have detailed out every penny that was saved, where it was saved from and how much money those savings would change, whether business gets better (as intended) or if business continues to decline. Seems more like the board saw the video that would be shown to employees asking for concessions.

What timetable has been given for profit sharing? Especially since you have to be making a profit in order to benefit... I am surprised their linking an employee's profit sharing to their work-groups concessions.

Thanks again CAL for the glimpse inside Continental Airlines.


Phil...
 
Bronko
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RE: Continental, Whats Next?

Sat Feb 26, 2005 12:24 pm

Thanks for posting the link to the video. I usually stick to the photography aspect of aviation, but found this video extremely interesting and educational.

I hope Continentals employees will realize that short term pain will turn into long term gain, and that CAL will indeed fix their financial problems.
Jet City Aviation Photography
 
FlyHoss
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RE: Continental, Whats Next?

Sat Feb 26, 2005 12:49 pm

The CAL ALPA MEC Chairman's update (sent today, Friday) stated that a tentative agreement is possible next week (I don't know how the FAs and the mechanics negotiations are progressing, though). Then the ratification process begins and that will likely take at least a few weeks. Will the various unionized work groups accept the new contracts? And will the Board defer the decision on aircraft acquisitions until the concessions are in place?
A little bit louder now, a lil bit louder now...
 
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ual747den
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RE: Continental, Whats Next?

Sat Feb 26, 2005 1:11 pm

It still amazes me how so many people on here try to talk CO up while slamming the other majors like UA DL AA and US. You must have short memories to not know that CO went bankrupt more times than anyother airline and is only here today because a great carrier (EA) was torn apart to keep them afloat. Im not saying that CO is not a good airline, in fact I have never had a bad experience on them and love to fly them into Mexico, but the point I am trying to make is that CO is not above the rest of them. CO is doing good now because they have already used bankruptcy to renegotiate their contracts and that is how they can make money when the rest cannot.
Frontier Airlines - Low Fares Done Right
 
Falcon84
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RE: Continental, Whats Next?

Sat Feb 26, 2005 1:17 pm

The company did not even sit down with the Flight attendant group until mid JAN. IMOH way to late!

Actually, it's the union's who have been the lazy asses, as usual. The company gave each workgroup a target amount-for us in field services it was $99 million-to meet. They gave us the flexibility to meet it how we wanted to meet it-employees made suggestions and had the input. And we got to our $99 million.

The pilot's, however, think this is a game, as usual. They made a "proposal" for less than half the target they were given, and management rejected it. The pilot's, the f/a's, the mechanics, were told how much they were to cut ,and it was up to them to figure out how to get there. They've obviously spent the last month playing games, and thinking they are going to escape any pay cuts.

They're wrong, they'll get pay cuts, be it voluntarily, or from a bankruptcy judge. It's the unions who have been fiddling while Rome burned.
Work Right, Fly Hard
 
deltaamtrak058
Posts: 80
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RE: Continental, Whats Next?

Sat Feb 26, 2005 10:08 pm

Great Video! I just wish the best for CO and hope they will make it through this terrible time...
The engine is the heart of an aeroplane, but the pilot is its soul. -Sir Walter Raleigh
 
calpilot
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RE: Continental, Whats Next?

Sat Feb 26, 2005 11:28 pm

Falcon,

Game? The e-mail I got last night suggested that a TA could be on the table as soon as next week. I belive the Union is only trying to find a balance between fair and unreasonable.

For the most part, I belive this pilot group understands the changes in Airline dynamics, and is willing to do what is necessary. I'm NOT going to watch every group on property take cuts and think I'm imnue to the same.

So don't run around the airport making things up, trying to get people pissed off between the pilots, the FA's, the ramp, etc., it does nothing but bring the whole Airline down!
 
WesternA318
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RE: Continental, Whats Next?

Sat Feb 26, 2005 11:28 pm

Long live CO, one of the best carriers left in the business. As far as any union activity would go, I seriously doubt it would happen, since the days of "take it orleave it" by the likes of the evil Frank are long gone.
 
navega
Posts: 467
Joined: Tue Nov 02, 1999 10:58 pm

RE: Continental, Whats Next?

Sat Feb 26, 2005 11:48 pm

Although I love Continental, I have see in expand and
grow and spend money when other airlines cut costs with
fleet size, salaries etc. To the point where I wondered what
Continental was doing and they seemed to go the opposite
of what the industry was doing during such harsh times.

Now I wonder if this will eventually have bad results for this amazing carrier and if it is too late.

Good service and consistency is not the answer right now
and like many other carriers who have gone through
shrinking pains, is it too late for Continental to start taking
actions now when others did so years ago to asure survival???
 
Falcon84
Posts: 13775
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RE: Continental, Whats Next?

Sun Feb 27, 2005 12:22 am

Game? The e-mail I got last night suggested that a TA could be on the table as soon as next week. I belive the Union is only trying to find a balance between fair and unreasonable.

The company has told you what the target $ amount for the pilot's group is. It's up to you to meet it. When you come in on a "proposal" at less than half what the company said your group had to meet, and you instead said "we'll stay at less expensive hotels", you're union has made it a game. Meet the damn target already. Do like we did in Field serivices-got together with our reps,and we gave them our suggestions at how to get there. We didn't like the pay cut, but we made the best of it, and came up with suggestions to meet the goal. Your union doesn't seem to be doing that. It's the same old crap. Well, there's no negotiationg with the number the company gave you guys. If you haven't figured that out by now, then you never will. Find a way to meet what the company put on the table, and stop the whining.

Although I love Continental, I have see in expand and
grow and spend money when other airlines cut costs with
fleet size, salaries etc. To the point where I wondered what
Continental was doing and they seemed to go the opposite
of what the industry was doing during such harsh times.


Actually, what CO has done has probably saved it from a fate that US, UA and DL are suffering now. They did NOT take off basic amenities like meals, pillows and the like. They aggressively expanded routes that make money-namely international, and more specifically, European service. They had the flexibility and the wits to us the 752 over the pond, instead of just wasting them on high-demand, zero-yield markets on domestic.

CO is hurting-no major isn't. But CO has been drowning in less water, simply because it was smart and put it's resources where it could have the best impact. I don't see that as a bad thing.

But when fuel continues to rise and ticket prices are at or below 1978 levels, adjusted for inflation, and the government continues to pile more and more taxes and fees on an industry that just cannot absorb them, you get to the point that, in order to return to profitibility, other things must give, and, in this case, it's payroll. It's not that hard to figure out.
Work Right, Fly Hard
 
Cactus739
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RE: Continental, Whats Next?

Sun Feb 27, 2005 12:59 am

NAVEGA..

Quoting NAVEGA (reply 23):
Good service and consistency is not the answer right now


Pray tell....what is the answer at your airline?
You can't fix stupid.... - Ron White
 
cvg2lga
Posts: 447
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RE: Continental, Whats Next?

Sun Feb 27, 2005 1:20 am

Bring back the DC-9's and the 747's!
They don't call em' emergencies anymore. They call em' Patronies.
 
ramerinianair
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RE: Continental, Whats Next?

Sun Feb 27, 2005 1:25 am

Where is Kellner from? He talks weird and moves his mouth weird, it's kind of freaky. I think he broke it down so everybody hears it loud and clear. Too bad the unions are stubborn.
And it was very interesting to see about hedging fuel . . . WN plays up that they hedge fuel so much. CO plays down hedging . . . interesting!
SR

[Edited 2005-02-26 17:33:24]
W N = my Worst Nightmare!!!!!
 
isitsafenow
Posts: 3413
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RE: Continental, Whats Next?

Sun Feb 27, 2005 1:35 am

Ramerinianair...some people are very good at public speaking and some need to polish a bit.
CO has always been a class act dating back to the Bob Six days of the 50's,60's and 70's. I think all employees will do what they need to do to survive, prosper and retire from this fine company.
safe
If two people agree on EVERYTHING, then one isn't necessary.
 
WesternA318
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RE: Continental, Whats Next?

Sun Feb 27, 2005 1:45 am

I think he came from some bank out West. Gordon was initially skeptical but he had heard of his reputation as a 'get-it-done' type of guy. Luckily when he came to Continental, he knew almost exactly where management neded to spend money to keep the revenue coming in and in the black, or fairly close to the profitability they aimed for.
 
tommy767
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RE: Continental, Whats Next?

Sun Feb 27, 2005 2:08 am

CO is taking some financial risks. At this point in the aviation industry, I would say that it is more than welcome!
"KEEP CLIMBING" -- DELTA
 
TACAA320
Posts: 7153
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RE: Continental, Whats Next?

Sun Feb 27, 2005 3:00 am

Quoting Tommy767 (reply 30):
CO is taking some financial risks.



I will appreciate if you can be more specific.

Thanks,
'Science without religion is lame, religion without science is blind'. Albert Einstein
 
avek00
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RE: Continental, Whats Next?

Sun Feb 27, 2005 3:15 am

As much as I love the golden globe, the bottom line is that CO's past behaviors and mistakes are catching up with it now. Truth be told, labor costs AREN'T the problem at Continental - the issue is that nearly all of CO's non-labor costs are fixed due to past business practices, and the airline has no choice but the fleece the employees to free up enough cash flow to service part of its crushing debt obligations and beg for creditor mercy on the balance.
Live life to the fullest.
 
Falcon84
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RE: Continental, Whats Next?

Sun Feb 27, 2005 5:00 am

and the airline has no choice but the fleece the employees

I'm one of those employees. I don't think I'm being "fleeced", my friend. I don't like the paycuts, but I understand why they're necessary. CO is running the smoothest, most efficient operation of any of the legacies, and still can't make money. When all else has been cut THAT DOESN'T AFFECT THE PRODUCT, then the largest cost that HAS to be looked at is labor. It's as simple as that.
Work Right, Fly Hard
 
AASTEW
Posts: 418
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RE: Continental, Whats Next?

Sun Feb 27, 2005 8:22 am

I just don't get it. CO's says their going to keep the inflight amenities the same and that's what separates them from other legacy carriers. If that was true how come CO isn't reporting profits since customers love their product sooo much more than the competitors UA US NW DL and AA.

lol...keep the sandwiches and take from the poor employees. Customers are not paying the price for the wonderful CO inflight amenities.

By the way CO employees were never able to have the best contracts in the industry, hence their many trips to BK. CO labor groups were only able to negotiate INDUSTRY STANDARD wages.
 
Cactus739
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RE: Continental, Whats Next?

Sun Feb 27, 2005 8:27 am

AASTEW....

Quoting AASTEW (reply 34):
By the way CO employees were never able to have the best contracts in the industry, hence their many trips to BK. CO labor groups were only able to negotiate INDUSTRY STANDARD wages.


Ask the United and Delta pilots about the best contacts in the industry.... they did wonders for those airlines...  Smile
You can't fix stupid.... - Ron White
 
avek00
Posts: 3254
Joined: Mon Oct 25, 2004 5:56 am

RE: Continental, Whats Next?

Sun Feb 27, 2005 8:39 am

"I'm one of those employees. I don't think I'm being "fleeced", my friend. I don't like the paycuts, but I understand why they're necessary. CO is running the smoothest, most efficient operation of any of the legacies, and still can't make money. When all else has been cut THAT DOESN'T AFFECT THE PRODUCT, then the largest cost that HAS to be looked at is labor. It's as simple as that."

That's my point exactly - the company can't park aircraft or break facility leases like other airlines, so the only way to reduce costs and still serve meals/etc. is to give labor a haircut. We're in total agreement.  Smile
Live life to the fullest.
 
WesternA318
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RE: Continental, Whats Next?

Sun Feb 27, 2005 8:43 am

Falcon,

I admire how well most of the factions within the company are taking these cuts. It's certainly a better mood than pre-1994, wouldnt you say?
 
Falcon84
Posts: 13775
Joined: Fri Sep 10, 2004 11:52 am

RE: Continental, Whats Next?

Sun Feb 27, 2005 9:34 am

If that was true how come CO isn't reporting profits since customers love their product sooo much more than the competitors UA US NW DL and AA.

CO isn't drowning in as much red ink as their competitors, but they're still drowning. Fuel is very high; yields are low, with the average airfare below 1978 rates (adjusted for inflation), and the airlines are being soaked by Uncle Sam in fees and taxes. In fact, CO HAS made some operational profits, just not overall profits, in the last few years.

When you add up the combination of high fuel prices, low yields, high-yield pax (the businessman) still avoiding the airlines, and exorbidant government fees, it's simply leading to red ink.
Work Right, Fly Hard
 
alb222
Posts: 217
Joined: Thu Jan 27, 2005 9:16 am

RE: Continental, Whats Next?

Sun Feb 27, 2005 9:51 am

Bottom line is that S&P has CO and the other legacies on the watch list. With high fuel, over-capacity and depressed fares it doesn't matter how great CO is...........................there is trouble brewing and who knows what will happen. CO, DL, AA ,NW will all run out of money if conditions do not change.
 
COfaninBOS
Posts: 284
Joined: Wed May 05, 2004 12:32 pm

RE: Continental, Whats Next?

Sun Feb 27, 2005 9:52 am

Continental is my favorite domestic airline. In the past year, I have been doing my little part by purchasing full first class fares when possible. I may just be one customor, but I want the friendly folks at CO to know that I appreciate their efforts to avoid the slash and burn policies at the so-called other full service carriers.

See you on Monday when I fly IAH-EWR-BOS in first. Will be my first trip on the 777 (IAH to EWR leg) and I can't wait. On my return, I get the 737-900 from EWR to IAH and that will make it a clean sweep for me, having been on every mainline type CO flies!

Good luck to all employees at Continental!
 
OttoPylit
Posts: 2259
Joined: Wed Dec 17, 2003 10:58 am

RE: Continental, Whats Next?

Sun Feb 27, 2005 10:10 am

Quoting Sllevin (reply 9):
This is why unions are important. Otherwise, as a worker, expect to make nothing. Divide and conquer is still going strong.



Um, I work for a highly non-unionized airline and have, so far, only taken a 10% paycut to save my company. The unionized group in my company have taken over 30% of a paycut to save the company? And I'm still making within the top 4 airlines payscale. Tell me again why the union is so important?



I agree with UAL747DEN. It is easy to talk up CO and don't get me wrong, they are a great airline. In fact, they are my second favorite. But, in the past 15 years, CO has been in and out of bankruptcy. They are no more impervious than any of the other airlines. Right now, I would say that CO, DL, and AA are best off, since they are not currently in BK and it does not appear that any will be dropping into it anytime soon.
I don't have a microwave, but I do have a clock that occasionally cooks shit.
 
klwright69
Posts: 2712
Joined: Mon Jan 17, 2000 4:22 am

RE: Continental, Whats Next?

Sun Feb 27, 2005 11:05 am

"But, in the past 15 years, CO has been in and out of bankruptcy."

CO EMERGED from BK 11 years ago. CO's first BK was around TWO decades ago. We're talking old, old news. OttoPylit, certain people drone on about CO's "numerous," and "many" BK filings (as if they're recent, almost annual occurences). UA never thought they would be in chapter 11 at all, and some are still extremely bitter about it. It takes the sting out of the current reality.

And as everyone has indicated, there is a very fine line between bankrupt and non-bankrupt legacy carriers these days.

I can't believe that just about no one has mentioned the high level of taxes levied on air travel. Fuel prices are only part of the problem!
 
toxtethogrady
Posts: 1861
Joined: Sat Dec 23, 2000 12:33 pm

RE: Continental, Whats Next?

Sun Feb 27, 2005 11:54 am

If there has been any progress in the negotiations short of a deal, I think the Feb. 28 date will slip. I also think CAL will take the 787's.

My only argument is with their most recent analysts' presentation, which said most of the carrier's growth this year will be on the Atlantic and the Pacific. Sounds like Houston and Cleveland are going to get the short end of the stick. And as it turns out, Continental's loads out of Houston and Cleveland are higher than those of any other legacy carrier's hub... with the exception of United in Denver. Missed opportunity?
 
toxtethogrady
Posts: 1861
Joined: Sat Dec 23, 2000 12:33 pm

RE: Continental, Whats Next?

Sun Feb 27, 2005 12:30 pm

"Truth be told, labor costs AREN'T the problem at Continental - the issue is that nearly all of CO's non-labor costs are fixed due to past business practices..."

That can be seen in the high percentage of the airline's revenues that goes into aircraft rents and interest expense. They need to get fixed costs under control.
 
brons2
Posts: 2480
Joined: Tue Sep 25, 2001 1:02 pm

RE: Continental, Whats Next?

Sun Feb 27, 2005 4:16 pm

Gordon once commented that everything other than the pencil in his hand was leveraged to the hilt.

I agree with Toxtethogrady. Fixed costs such as aircraft leases need to be brought under control. They should be negiotiating with lessors right now. The threat of a bankruptcy should be a powerful tool in obtaining lower lease rates.

Not to say that the employees won't have to contribute also...but the fixed cost base should not be a sacred cow and should be explored.
Firings, if well done, are good for employee morale.
 
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lightsaber
Moderator
Posts: 20309
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RE: Continental, Whats Next?

Sun Feb 27, 2005 6:12 pm

First, CAL, great thread and excellent video.

I agree with one video premise: you grow or you rot. If CO grows, they will prove to be successful. If (long term) an airline is shrinking... throw in the towel, every company needs a mix of "greybeards" and "fresh blood." Without both, "game over man."

Quoting Klwright69 (reply 42):
I can't believe that just about no one has mentioned the high level of taxes levied on air travel. Fuel prices are only part of the problem!

Here here! I totally agree.

Quoting Brons2 (reply 45):
Fixed costs such as aircraft leases need to be brought under control.

While I agree, its much easier with positive cash flow (improved credit rating). Until the capital markets are once again open to CO, they can't exactly threaten to take their business elsewhere. Have you seen the collateral US and UA have had to put out for loans? Does CO have that kind of collateral?
Quoting Brons2 (reply 45):
Gordon once commented that everything other than the pencil in his hand was leveraged to the hilt.
How much can he get for the pencil?  Big grin

I do wish CO well. I have enjoyed flying on them.

Lightsaber
Winter is coming.
 
ual777contrail
Posts: 2914
Joined: Sun Feb 17, 2002 11:33 am

RE: Continental, Whats Next?

Sun Feb 27, 2005 6:47 pm

Finally someone said it. Reply 44 and 45 are comments nobody wants to hear, but are true.

Funny when CO employees huddle on a thread,( SO do UA employees) but CO may be in a smaller pool of red ink, but they are still drowning. The depth of the ink is pointless, the drowning is serious.

CO is levered? What would happen if fuel prices rose higher, another terrorist attack? CO would be gone. I would like to see the rumors come true, UA/CO merge?

Co has made great strides in increasing international routes, Europe in particular, and now finally PEK!!! They have a long way to go, but in the right direction.

Best of luck to the CO employees on this forum.

UAL 777 CONTRAIL
 
Planesmart
Posts: 2891
Joined: Sun Dec 05, 2004 3:18 am

RE: Continental, Whats Next?

Sun Feb 27, 2005 7:18 pm

If you are lending money to a leasing company, or investing in one, or your pension fund is, will you be happy to have a lower or zero return on your investment?

And if you are prepared to put up with a low return for a year, are you prepared to put up with a lower return for 5 years?

If you could earn 5% return on a low risk investment, would you be prepared to accept the same return on a high risk investment? And if you had the choice, and returns were the same, would you willingly choose the higher risk?

The reality is as risk increases, interest margins increase. The businesses least able to pay high interest rates pay the highest interest rates / lease rates.

Probably more than 50% of all commercial aircraft loans and leases in the US are subject to subsequent concessions, reflecting the current financial condition of airlines. These include interest and lease holidays, discounts, condition waivers like excess hours and cycles, free or shared cost refurbishments, and many others.

Motivation is the undesirability of the alternatives - zero revenue or even negative revenue from idle aircraft, Chapter 11, bankruptcy, plus pressure from other lenders (co-operate for common good), a white knight might appear (like the Government), or another airline may fail (taking pressure off our customer).

The bigger the discount an airline tries to extract from pre-existing lease and finance contracts, the bigger the savings financiers expect to see management, staff and other suppliers taking.

Current US airline interest margin and lease rate concessions are effectively being funded by more successful airlines in other parts of the World.

Most US airlines could still buy or lease new aircraft, but at effective interest rates so high, operating older owned aircraft is by far the most economic option in the short-term.
 
avek00
Posts: 3254
Joined: Mon Oct 25, 2004 5:56 am

RE: Continental, Whats Next?

Sun Feb 27, 2005 10:02 pm

"The threat of a bankruptcy should be a powerful tool in obtaining lower lease rates."

Unfortunately, that stick won't be quite as effective for Continental - much of its fleet is relatively new and can be more easily placed with other operators. The BK threat works better for airlines that have middle-aged/older or less-popular fleet types, where a lessor would be stuck with unwanted planes on its hands.

Not to mention, of course, that investors head for the hills whenever the B-word is mentioned.
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