Continental says luggage fee to generate $100 mln
CHICAGO (Reuters) - Continental Airlines on Thursday said it expects to see $100 million in revenue and cost savings related to a new $15 dollar bag-check fee.
The fourth-largest U.S. airline also said it is comfortable with its bookings over the next six weeks. The outlook, which was issued in a government filing, came as experts speculate on how massive capacity cuts, fare increases and unpopular fees will impact travel demand.
Shares of Continental gained 9.52 percent to $17.60 in early trade on the New York Stock Exchange, outpacing a 4 percent gain in the Amex airline index. The rally in airline shares accompanied a dip in the price of oil to $100.10, its lowest price since April.
"Continental's language appears an effort to assuage largely misplaced investor fears that demand is poised to crater," JP Morgan analyst Jamie Baker said in a research note.
The airline industry has been struggling to offset the high price of jet fuel. A recent drop in oil prices has pressured fuel prices and given airlines some much-needed relief.
Continental introduced the fee to check a single bag last week, matching those implemented by rivals this year as carriers attempt to offset skyrocketing fuel bills. Continental said the $100 million would be generated through the new revenue as well as cost savings from not having to check as many bags.
The airline, which plans to trim its domestic mainline capacity 11 percent in the fourth quarter, said it expects that number to be down 2.9 percent in the third quarter.
Continental said consolidated domestic bookings for the coming six weeks were about 2 percentage points higher than last year.
The carrier also said it has hedged about 53 percent of its expected consolidated fuel needs for the third quarter.
The company expects to end the third quarter with about $2.8 billion in cash and short-term investments.
(Reporting by Kyle Peterson, editing by Maureen Bavdek and Gunna Dickson)
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