"Continental seeks cuts from Hopkins"

Monday, March 24, 2003

Continental seeks cuts from Hopkins 
By Mark Rollenhagen 
The Cleveland (OH) Plain Dealer


Continental Airlines will meet with city officials today for urgent talks on
how to reduce the carrier's costs at Cleveland Hopkins International
Airport. 

The airline announced last week that it needs to cut $500 million in annual
operating expenses to survive a crisis that has led USAirways and United
Airlines into bankruptcy and left most other major airlines on the brink. 

"We recognize the airlines are in a survival mode," said Cleveland Port
Control Director John Mok, who oversees the city's airports. "Everything is
on the table." 

Continental Chairman Gordon Bethune said the airline needs to cut landing
fees - assessed on every plane that lands at an airport and based on the
plane's weight - and other airport costs at its hubs in Cleveland, Houston,
Newark and Guam. 

Two out of three travelers at Hopkins board Continental flights. About 3,500
Continental and Continental Express workers are based at the airport. 

In addition to reducing airport costs, Continental plans to cut 1,200 jobs
throughout its 50,000-worker system, close some ticket offices and
renegotiate contracts with suppliers. The company hopes to cut most of the
jobs through attrition, leaves of absences and voluntary buyouts. 

"We're taking these measures to ensure our survival," Bethune said at a news
conference last week. 

Bethune will be in Cleveland tomorrow to give a speech to the Greater
Cleveland Growth Association about the crisis in the airline industry. 

Labor is the largest single operating cost for major airlines, followed by
fuel and aircraft. Landing fees account for about 2 percent of the airlines'
costs, according to the Air Transport Association. 

The fees pay for about a quarter of the city's cost of operating the
airport. They are set by a formula that adds up the airport's annual
expenses and deducts income from parking, retail sales, passenger charges,
rental car fees and airline rent. What's left is covered by the landing
fees. 

The Hopkins landing fee jumped from $2.65 to $4.20 per 1,000 pounds of
aircraft weight this year. Most of the increase (64 percent) was needed to
make payments on money borrowed to expand the airport, including the
construction of a new runway, airport officials said. 

About 32 cents of the $1.55 landing fee increase was needed because, with
the drop in air travel the past two years, Continental began using smaller
aircraft that are lighter and pay less in landing fees. 

Cleveland's landing fee is higher than many airports, including those in
Pittsburgh and Cincinnati. 

But Candace McGraw, the airport's chief of staff, said the expenses covered
by the fees vary from airport to airport. Some have lower landing fees but
collect more money from airlines through other charges and agreements,
McGraw said. 

Hopkins is looking at ways to cut landing fees by reducing its expenses,
including negotiating lower utility rates and seeking federal grants to
cover increased security costs.


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