Continental, Southwest forced to slow growth

Southwest said it would go ahead with plans to add 29 new Boeing jets to its fleet this year but only 14 — half its original plan — in 2009.

Southwest's Kelly said his airline had cut its growth rate from 8 percent a year ago to about 2 percent in 2009. "We may not grow at all in 2009," he added.

Continental will take 14 older jets out of service beginning in September and reduce domestic capacity 5 percent after the peak summer travel season.

Slower growth, or even contraction, could help the airlines control costs and boost fares. The same result might be achieved through consolidation, such as Monday's announcement that Delta Air Lines Inc. has agreed to take over Northwest Airlines Corp.

Since Monday, speculation has increased about a combination of Continental and UAL Corp.'s United Airlines. Continental took a small but public step in that direction Thursday by buying out Northwest's right to veto a deal involving Continental.

Continental Chairman and Chief Executive Lawrence Kellner said he would still prefer for the airline to remain independent, but the Delta announcement changed things.

"We are reviewing our strategic alternatives and will do what we need to do to continue our success and to remain a strong, long-term competitor," he said.

All the airlines have been raising fares and fuel surcharges. Continental and other so-called network carriers such as United, Delta and AMR Corp.'s American have enacted about a dozen increases this year, including a hike this week of $10 to $20 per round trip. The latest Southwest increase was $6 to $20 per round trip.

Vacationers and business fliers should brace for more of the same between now and summer, said Tom Parsons, chief executive of travel Web site Bestfares.com.

"Get bigger pockets, because you're going to have to dig deeper," he said.

Shares of Southwest rose 11 cents to $12.61 Thursday, while shares of Continental gained 27 cents to $21.11.

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