Unclear How Guam Will Be Impacted by Continental's Cuts

Impact of airline's cuts on Guam still unclear
By Gaynor Dumat-ol Daleno
Pacific Daily News
June 7, 2008

The parent company of Guam-based Continental Micronesia announced it will reduce flights and lay off about 3,000 managers and employees worldwide because of jet fuel prices.

"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," Houston-based Continental Airlines stated in a bulletin to employees.

What Continental Airlines' cutbacks mean to its employees on Guam and the rest of Micronesia is unclear at this time. Continental Micronesia's Guam office isn't commenting on the flight cuts and layoffs announced by its parent company's corporate office.

Grace Garces, with Continental Micronesia's marketing office, said there's nothing to add to what corporate has announced.

On Guam, Continental Micronesia employs about 1,500 people and its $90 million annual payroll has been an asset to the local economy.

When Continental Airlines trimmed as many as 12,000 of its 56,000 global workforce weeks after 9/11, about 250 Continental Micronesia employees were furloughed, according to Pacific Daily News files.

"Continental doesn't anticipate any further comment until after it has had the opportunity to meet with employees during the next week," the airline's Houston corporate office stated.

The airline stated fare increases haven't been enough to cover its soaring jet fuel costs.

They acknowledged, with higher fares, fewer people will fly.

"As fewer customers fly, we will need to reduce our capacity. ... As we reduce our capacity, we will need fewer employees to operate the airline," according to the company statement to its employees.

Continental's 3,000 global job cuts translate to almost a 7 percent reduction in its 45,000 global workforce. The job reductions will take effect after the peak summer season, except for management and clerical reductions, which will begin sooner, the airline states.

"The company will offer voluntary programs in an effort to reduce the number of co-workers who will be furloughed or involuntarily terminated due to the capacity cuts. Details of these programs will be available next week," the airline states.

The airline industry is facing its worst crisis since the terror attacks in 2001, Continental states.

Guam tourism
There's concern globally in the tourism and travel industry about soaring fuel prices, said Gerry Perez, Guam Visitors Bureau general manager.

He said airlines in general are trying to cope by reducing flights and maximizing capacity. The best way to insulate Guam from the impact of any reduction in flights is to aggressively promote the island, he said.

But the visitors bureau's marketing cash has been dwindling, from as much as $18 million for Japan marketing alone in the late 1990s to less than $6 million for Japan marketing last year.

When fuel prices make travel to longer-haul destinations more expensive, Perez said there's a possible "a silver lining" for Guam in the race for tourists from Japan.

But Perez said that silver lining is "a maybe."

Overall, fuel-related economic jitters and the global credit crunch have dampened enthusiasm for travel worldwide, he said.

Still, Guam's visitor arrivals in May showed a rebound from April. Preliminary arrival numbers show Japanese arrivals went up 5 percent and South Korean arrivals increased 15 percent last month compared to May last year, Perez said.

Houston cuts
Continental Chairman and Chief Executive Lawrence Kellner, and President Jeff Smisek, will forgo pay for the rest of the year, the airline stated.

Last year, Kellner's salary was $712,500 and total compensation was valued at nearly $6 million by the company, down 9.3 percent from the year before, according to an analysis by The Associated Press of a company filing with the Securities and Exchange Commission.

However, about one-third of Kellner's compensation was in stock and option grants that are now worth far less than they were when granted in February 2007, because of the slump in the company's stock, the AP reported.

Fewer flights
The airline states it will implement flight reductions in September, at the end of the summer season. Available seats for domestic flights will drop by about 11 percent in the fourth quarter, compared to the same period last year.

Continental will retire 67 Boeing 737-300 and 737-500 aircraft between now and next year and replace them with fuel-efficient aircraft, the airline states.

In the second half of this year, Continental will receive its order for 16 new, next-generation Boeing 737-800s and 737-900ERs. It will receive 18 more of the fuel-efficient aircraft next year. Continental's fleet will shrink from 375 this year to 344 aircraft next year.

Jet fuel is at $151 a barrel now, a 75 percent increase from a year ago, according to Continental.