Continental CEO: We'll cancel flights before paying fines

[Eric Diffoot]

Continental CEO will cancel flights before fines

By DAVID KOENIG, AP Airlines Writer David Koenig, Ap Airlines Writer – Tue Mar 9, 1:14 pm ET

DALLAS – Continental Airlines plans to cancel flights rather than risk stiff fines under new federal rules designed to punish carriers for delaying passengers.

CEO Jeff Smisek said Tuesday the result will be that passengers will have more trouble getting to their destinations.

A spokesman for the U.S. Transportation Department said airlines can avoid fines by doing a better job of scheduling flights and crews.

Under a Transportation Department rule taking effect next month, airlines can be fined up to $27,500 per passenger if planes are delayed three hours and passengers can't get off.

Smisek said at an investor conference in New York that long delays are rare, and mostly caused by an outdated air traffic control system that the government has failed to upgrade.

Airline industry officials say they should decide whether to wait out delays, even if the delays go past three hours.

Smisek said many passengers on delayed flights "really want to go to LA or Mumbai, but the government by God says, 'We're going to fine you $27,500.' Here's what we're going to do: We're going to cancel the flight."

Because airlines have cut flights, leaving the remaining ones more crowded, passengers will have fewer chances to rebook on another flight. Passengers, he said, won't get to their destinations "for maybe days."

Transportation Department spokesman Bill Mosley said the new rules will help consumers pick airlines that don't have tarmac delays or that routinely cancel their flights.

"Carriers have it within their power to schedule their flights more realistically, to have spare aircraft and crews available to avoid cancellations" and to rebook passengers when there are cancellations, Mosley said.

The new rules grew out of passenger frustration over incidents in which planes were stuck on the tarmac for hours before takeoff. With Congress considering legislation to crack down on delays, the Transportation Department imposed its own 3-hour rule, including fines of up to $27,500 per passenger.

That means that for a fully packed medium-sized plane such as a Boeing 737, fines could top $3.5 million per flight, and go much higher on bigger planes used for international flights.

At the same investor conference, Continental estimated it will take in $350 million this year from fees on checked bags — a 30 percent jump from the $270 million it raised last year.

Continental recently raised its fees to $25 for the first checked bag and $35 for the second, although elite frequent fliers and some other customers don't have to pay.

Houston-based Continental, the nation's No. 4 airline, is still thinking about growing by combining with another airline. Continental cut off merger talks with United Airlines a couple years ago, but both are now smaller in comparison to Delta, which acquired Northwest to become the world's largest airline.

"If we think it's in our best interest to bulk up defensively, we'll do so," Smisek said.

http://news.yahoo.com/s/ap/20100309/ap_on_bi_ge/us_continental_airlines_cancellations

Some bold words coming out of Continental CEO Jeff Smisek I'll say, reminds me of Ryanair's Michael O'Leary. Yes mother nature is out of our control but it doesn't mean we can't do anything about it. Airlines just have to deal with it and adapt by changing how they do things and being more efficient.

[Leftseat86]

Airlines just have to deal with it and adapt by changing how they do things and being more efficient.

Unfortunately reality is not so simple.

[MCM]

Being more efficient? You're joking aren't you? It is the INCREASE in efficiency that is required to survive in the current low cost dominated world that is the root of most delays.

Having spare aircraft sitting around, while great for having flights on time, does nothing for efficiency nor for the tarmac delays this is designed to stop.

This will lead to cancellations rather than "giving it a go"... but if thats what they want, then thats what they'll get.

[EconomyClass]

Are there places where cancellation records are available to look at. If companies "solve" their problems with tarmac delays, they will now be forced to cancel. That may play in favor of higher-cost airlines. And to me, that's good. I've thought ever since the days of Alfred Kahn that this race to the bottom was unfortunate. Truthfully, people are dead because of it. I don't see how Alfred Kahn can be proud of consumer savings that resulted in people dying in the name of profit.

[Gabriel]

Smisek said many passengers on delayed flights "really want to go to LA or Mumbai, but the government by God says, 'We're going to fine you $27,500.' Here's what we're going to do: We're going to cancel the flight."

That's bullshit.

Nobody is saying "don't have delays", just "don't keep the passengers wainting in the plane on the tarmac" which some times means "don't keep passengers who boarded for a 1 hour flight trapped in the plane on the tarmac for 8 hours without AC, food, water and WC". However, do keep passengers in the terminal for as long as needed (IF needed).

[ash414]

Well, people wanted their "bill of rights" so here it is. Now you have to live with the consequences of that, which will be more cancellations. Ask and ye shall recieve!!

[Foxtrot]

Re:

That's bullshit.

Nobody is saying "don't have delays", just "don't keep the passengers wainting in the plane on the tarmac" which some times means "don't keep passengers who boarded for a 1 hour flight trapped in the plane on the tarmac for 8 hours without AC, food, water and WC". However, do keep passengers in the terminal for as long as needed (IF needed).

He's talking about the three-hour rule, not a one or two-hour delay. It's a case where no party gets a full resolution to the problem. It really is a bad choice to make, either you keep passengers in planes for three hours and hope that in those three hours, the weather or whatever's causing delays improves, and risk paying fines if they last longer, causing the ire of passengers and lots of unhappy people, or cancel flights and cause the ire of passengers and lots of unhappy people. Either way you're going to make some people mad.

[Gabriel]

He's talking about the three-hour rule, not a one or two-hour delay. It's a case where no party gets a full resolution to the problem. It really is a bad choice to make, either you keep passengers in planes for three hours and hope that in those three hours, the weather or whatever's causing delays improves, and risk paying fines if they last longer, causing the ire of passengers and lots of unhappy people, or cancel flights and cause the ire of passengers and lots of unhappy people. Either way you're going to make some people mad.

Or... you find a way to get your passengers to the terminal to wait until the flight can leave, hopefully in less than 3 hours, but if it's more, no fines. No need to cancel the flight. The plane can wait the same with the passengers on-board or in the terminal.

[MCM]

No it can't Garbiel.

If I'm departing from X going to JFK, and there is weather issues at JFK, then I'm going to cancel my flight rather than risk landing and not being able to immediately disembark for reasons beyond my control.

In terms of departures, we're also talking about airports where there is insufficient ground resourses to support the number of operations occurring, and quite often it is out of the individual operators control.

[3WE]

Ok- the Gabriel MCM debate is interesting.

The new law came about because of some really bad stranding stories- which sorry- were NOT cool!

Sure- there were days when the airlines TRIED to do what was right and weather and the system conspired against them.

Then there is the situation where the passengers are sitting there for 8 hours within sight of the terminal- sorry MCM, that is BS as Gabriel says.

Anyway- these things kept happening- over and over.

So- if the airlines couldn't fix it themselves, then we have the law.

And- arguably, maybe cancelling the flights is what they SHOULD be doing.

Now- I have to say that this threatened per-passenger fine seems a bit much.....of course- in reality that's just the law at it's finest- I doubt that sort of fine would truly be imposed.

[MCM]

I agree that having 8 hour delays not being able to disembark is bad. I have always agreed with that (including in the previous thread).

What I disagree with is that THIS approach will fix the problem.

Airlines have, unfortunatley, limited ability to solve this problem, and threatening the AIRLINE with high charges will not necessarily solve the problem. Why? Because the airline doesn't want them sitting out on the tarmac either!

The issue needs to be solved at a whole industry level. Airport planners for the rediculous terminals and tight airport design. Insufficient stand-off bay space for parking aircraft when they can't depart. ATC not placing stronger restrictions on arrivals (which yes, will lead to delays).

My bet is that this fine will lead to SIGNIFICANT delays (far in excess of the current ones, albeit not onboard the aircraft), and far more cancelled flights.

What is the bet that as soon as this starts happening, passengers demand compensation from their $20 fare because they were delayed in the terminal for 8 hours, or their flight was cancelled because an airline couldn't afford to take the RISK of a delay.

Either way, it isn't solving the overall problem.

[3WE]

...What I disagree with is that THIS approach will fix the problem....

To some extent- this is "be careful what you wish for or you may get it". Basically-that is what has happened.

And, to a major extent, we the passengers, need to get out a mirror when we point fingers. Our shopping habits for cheap fares are why gate-utilization is 110%, and why the airline can't whip out 20 sets of stairs, unloading crews and shuttle busses when delays happen.

Anyway- what would YOU suggest as a fix. Yes, ATC can be part of the problem- but again, some of the bad stranding incidents fall heavily on the airlines.

Airline promises to change and the threat of regulations didn't work- so now it's a much more genuine threat of a fine- and at least now there are some changes.

[EconomyClass]

In terms of departures, we're also talking about airports where there is insufficient ground resourses to support the number of operations occurring, and quite often it is out of the individual operators control

Not sure there's a single person here who agrees with me, but the disparity between planes and airport gates comes from the ridiculous situation where anybody can start up another airline, using money made easy by governments. And yet I think there isn't effective demand to support airport expansion. Then, too, with hub and spoke, the dominant airline in a hub may have most gates locked up.

Add it all up and its that old religion of the "free market". But is the free market supplying its own runways and gates? No, those are public goods that all these aviation entrepreneurs expect to appear out of nowhere.

Frankly, free markets look way better on paper than in reality. That was true even back in Adam Smith's day. In the end, the "free market" is a pure myth. All that really exists are mixed markets. No need to get buried in the detail of how it has to be that way. If societies would just stop trying to deny that private-public partnership will always be what will exist and figure out how to mesh the two in the most effective way. Right now private business and government are like two warring neighbors, neither of whom will move and neither of whom will cooperate in a reasonable way. So every solution is grudgingly accepted and then undermined.

[Leftseat86]

The problem here, is that the airport system in the US works efficiently, at maximum capacity, when the weather is nice. When the weather turns sour, the system cannot handle the usual volume. The system then does what it can, and that sometimes results in airplanes sitting on the ground at JFK for 3+ hours waiting for a new departure slot while number 48 in line for departure. The only way to really fix that root problem that MCM is talking about, is to re-engineer the airports traffic handling to provide enough elasticity to cope with those extreme situations. I.E. allowing only half the # of flights that depart in an hour so that when a snow storm hits or the runways are shut down for 30 minutes because of CB cells, the delays will be much shorter because the system has more slack. But that is likely never going to occur given the growth rate of air travel demand and the sheer volume of flights at major hubs like NYC or Boston.

[EconomyClass]

To me that's like building a plane that requires both engines operational. They don't build them that way so they don't crash when the inevitable happens. Similarly, it's just dumb to load the system to its fair-weather max. And especially I think its dumb when it becomes nearly impossible to make a profit in the business. I think it was Samuelson who used barbershops to demonstrate how some markets compete down to the zero profit level. Well, right now I think there are too many "barbershops" operating in aviation. We're running the production line at full tilt and then having problems when it breaks down. It seems to me that we're screwing up and trying to run it hell bent for leather.

It may sound like a dumb question, but does our society really want to pay for a smoothly operating system? If we did, we'd spend more money on a lot of improvements. The fact we don't means we don't really want to fly that much. Or..........we're just living in a dreamworld.