Continental Reveals Costs of Air Alert

Continental Airlines has revealed that last month's security alert cost the carrier millions of dollars in lost revenue, in the first admission by a non-UK carrier that heightened security concerns are having a lasting financial impact.

Houston-based Continental was one of three US airlines alongside American and United identified by US security officials as the target of an alleged plot to bomb transatlantic aircraft following a UK-led intelligence operation on August 10.

The alert led to sweeping new security measures at airports, and the ensuing disruption forced British Airways, Ryanair and other UK-based carriers to cancel hundreds of flights.

Non-UK carriers maintained there had been minimal impact on passenger bookings after the initial disruption, but Continental's latest monthly traffic report has suggested the carrier was forced to cut fares in order to support higher traffic levels.

Continental is one of the largest operators of trans-atlantic services, and continued to add flights over the summer alongside rivals such as Delta, leading analysts to forecast downward pressure on fares.

Continental said late on Friday that its margins in August had been hit by what it described as the "elevated security concerns", reducing its closely watched revenue per available seat mile by 1.5 percentage points from the expected level.

The airline said RASM rose between 6.5 per cent and 7.5 per cent during the month, below analysts' estimates, in spite of record traffic and load factors on other routes, and trailing the 9.6 per cent rise in July.

Continental's mainline RASM which excludes regional feeder services rose 5.5-6.5 per cent in August, and traffic was 12 per cent higher in terms of revenue passenger miles.

Merrill Lynch had forecast an increase of 7-8 per cent, and while this was in line with the performance excluding "security concerns", the carrier had consistently beaten estimates in recent months.

Continental is one of the few US carriers to release monthly revenue statistics broken down by region.

Its report will raise concerns about the sustainability of the industry's financial recovery, as airlines enter the slower travel season following the Labour Day holiday.

All the major US carriers reported higher operating profits during the second quarteras a series of fare increases and continued cost-cutting helped to counter higher fuel prices.

The higher fares have been helped by capacity cuts over the past two years, but year-on-year comparisons will become tougher for airlines to match after August, noted Merrill Lynch.

News stories provided by third parties are not edited by "Site Publication" staff. For suggestions and comments, please click the Contact link at the bottom of this page.