Continental Sees Revenue Hit

The airline says a new pricing scheme at Delta will hurt sales more than originally estimated.
By Ross Snel ,

Continental Airlines

(CAL) - Get Report

said it now expects a $200 million-a-year revenue hit as a result of the new pricing structure instituted by rival

Delta Air Lines

(DAL) - Get Report

.

Delta announced its so-called Simplifares program on Jan. 5. In addition to simplifying its pricing structure, Delta capped domestic economy fares at $499 one-way and first-class fares at $599 one-way. It also eliminated the Saturday-night stay requirements that annoyed many travelers.

Continental, the nation's fifth-biggest airline, has matched Delta's fare reductions in competitive markets. In a regulatory filing Wednesday, Continental said: "Our experience to date as a result of Delta's fare reduction has demonstrated the fare reductions are not being sufficiently offset by increases in passenger traffic so as to make them revenue positive, and any associated cost reductions are immaterial to date."

Continental noted the $200 million forecast was about $50 million higher than its previous estimate of the revenue impact of Simplifares.

"In addition, our operating results may be affected by an even greater amount due to the expense of handling the additional passengers stimulated by the lowered fares," the filing said.

Continental shares were off 60 cents, or 4.8%, at $11.85. Airline stocks slumped Wednesday as oil traded above $55 a barrel for the second day in a row. The Amex Airline Index was down 1.6%.

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