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Continental to cancel flights, not risk fines

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

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

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Smisek said at an investor conference in Manhattan that long delays are rare, and mostly caused by an outdated air traffic control system that the government has failed to upgrade.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

The federal rule 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 U.S. 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 approach $4 million per flight.

At the same conference, Smisek repeated earlier comments that Continental is beginning to see a return of business travelers.

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.


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