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Continental Cuts Fall Capacity, Focuses on Employees

You know it's a crazy week when you see an airline cut capacity by more than 8 percent, and all you can do is shrug it off. I mean, after United's massive cuts, yesterday's cuts from Continental seem, well, minor. But of course, they aren't. There are some very serious cuts here, but that's not the most interesting part. What's most interesting is to contrast how well Continental handled it compared to how poorly it was done by United.

First, the basics. Continental will retire 37 older 737s this year and another 30 next year. That's not as big of a deal as it sounds, because unlike United, they actually have aircraft on order to replace some of them, but previously those would have been additional aircraft and not replacements. The net loss will be 21 aircraft this year and 12 next year.

Where it gets interesting is in how they handled this. Continental's press release was simply the letter the airline sent to employees with a brief preface:

Continental Airlines (NYSE: CAL) released to its more than 45,000 employees the following employee bulletin and message from Larry Kellner, chairman and chief executive officer, and Jeff Smisek, president. Continental does not anticipate any further comment until after it has had the opportunity to meet with employees during the next week.
As you can see, the airline has spent a great deal of time focusing on how this will hurt employees, and it will hurt employees with more than 3,000 job losses. But the letter does what it can to ease the pain as best it can. It's written as if it comes from a human being unlike United's super corporate speak. Even United's phone call to employees couldn't escape the mind-numbing verbiage for which CEO Glenn Tilton has become famous.

In Continental's letter, you can tell that a great deal of thought was put into every detail. They put the change in fuel costs in terms of the cost per employee ($50,000) as opposed to costs per airplane. But there was one gesture in particular that shows how much this management team gets it.

In recognition of the crisis and its effect on their co-workers, Larry and Jeff have declined their salaries for the remainder of the year and have declined any payment under the annual incentive program for 2008.
Everyone shares the pain at Continental. This may not impact the bottom line that much since it's only two people, but that doesn't matter. Everyone shares the pain. Yeah, I'm looking at you American. This is why the front line has no faith in American's senior management. They certainly don't share the pain.

So, a bittersweet pat on the back is due for Continental's management here. It's a bad time for everyone, but at least the employees at Continental can feel proud to work an airline that's handling the situation as best it can.

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