Continental cuts Mexico flights 50 percent on demand decline

 
Bloomberg News
Published5/1/2009 8:24 AM

Continental Airlines Inc. cut seating capacity to Mexico by 50 percent after travel demand fell, becoming the first U.S. carrier to shrink flying because of the swine flu.

The new schedule, which takes effect May 4, puts smaller jets on some routes and trims flight frequencies so all 29 Mexico destinations keep service, Houston-based Continental said today. Continental has the most flights to Mexico of any airline.

 

“Continental’s decision to pull down capacity to Mexico was inevitable given the steep falloff in traffic to both leisure and business destinations,” said Douglas Runte, a Piper Jaffray & Co. analyst in New York. He doesn’t rate the shares.

Continental joined airlines from outside the U.S. in paring operations in the country hardest hit by the new flu. Canada’s two biggest carriers and tour operators in that country and Europe suspended service this week, as did Argentina and Cuba.

“We were already experiencing soft market conditions due to the economy, and now our Mexico routes in particular have extra weakness,” Continental Chief Executive Officer Larry Kellner said in a statement.

Continental will continue to monitor demand and “adjust our capacity and costs accordingly,” he said.

American, US Airways

AMR Corp.’s American Airlines said yesterday it was reviewing its Mexico schedule and had extended the grace period to change flights without penalties. US Airways Group Inc. reported a “heavy” volume of calls from travelers about Mexico flights. UAL Corp.’s United Airlines also extended to May 31 the time passengers can change plans without paying a penalty.

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Continental said it operated an average of 450 weekly departures from the U.S. to Mexico. The flu virus originated in Mexico, where schools have been closed and restaurants shut.

Using smaller jets on some routes means that while the number of seats flown to Mexico will drop by half, flights will fall 40 percent.

Weekly flights to Cancun will drop to 48 on May 4 from 98 now. The following week, the number will fall to 40, for a 59 percent reduction, Julie King, a spokeswoman, said in an interview. Weekly flights to Mexico City will fall to 78 on May 4 from 116 now, and then to 60 on May 11 for a 48 percent drop.

The U.S. Centers for Disease Control and Prevention recommended on April 27 that nonessential travel to Mexico be avoided. It stopped short of advising consumers not to go there at all.

Air Canada and WestJet Airlines Ltd., Canada’s largest carriers, suspended Mexico service earlier this week, as did Montreal-based tour operator Transat A.T. Inc. TUI AG and Thomas Cook Group Plc, Europe’s biggest tour companies, also canceled flights.

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