1. American Airlines
2. United Airlines
3. Delta Air Lines
4. Continental Airlines
5. Northwest Airlines
*6. Southwest Airlines (approaching NWA quickly, may pass by years end)
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Continental Airlines Inc. has passed bankrupt Northwest Airlines Corp. to become the fourth-largest U.S. carrier, the first change in the top-five rankings since 2001.Southwest Airlines Co., the largest low-fare carrier, also may be close to tying Northwest for the No. 5 spot by year's end as it expands seating capacity by as much as 9 percent.
Continental is expanding as Northwest and other rivals cut capacity to help boost fares. With $1.6 billion in annual cost savings since 2002 and a younger, more fuel-efficient fleet, Continental plans to grow by 8.3 percent this year.
``There is a shift happening,'' said Alan Sbarra, an airline consultant with San Francisco-based Roach & Sbarra. ``We're going to see that carriers that do not get their costs in order and can't compete in the long run are going to shrink more and more.''
The rankings are based on carriers' reports through April on traffic, or the number of miles flown by paying passengers. Traffic at Houston-based Continental rose 13 percent to 24.6 billion miles. Northwest fell 6.2 percent to 23 billion. Southwest climbed 17 percent to 21 billion.
American Airlines is the world's largest carrier, followed by United Airlines. Delta Air Lines, the No. 3 U.S. carrier, is in bankruptcy protection and also is cutting capacity.
The last change among the top five occurred in April 2001, when AMR acquired bankrupt Trans World Airlines Inc. and moved ahead of United as the largest carrier.
Continental's move to the No. 4 spot also marks the first shift among the industry leaders because of an airline's own growth, not a merger, since at least 1997, according to Bloomberg data.
``It doesn't surprise me to see Continental move up that rung,'' Terry Trippler, who monitors fares and the airline industry for Cheapseats.com, said in an interview. ``This is an airline on the move in more ways than one. Northwest and Delta are not going in the same direction as Continental.''
Counting cuts in domestic service, overall capacity is falling for most large U.S. carriers. Delta may shrink by 7 percent, and American by 1.3 percent.
Northwest has been shedding planes and unprofitable routes since it filed for Chapter 11 protection Sept. 14. The Eagan, Minnesota-based airline cut capacity in its main jet operations by 11 percent in the first quarter, and has said the reductions may reach 15 percent or more.
Northwest spokesman Kurt Ebenhoch declined to comment on the rankings change.
The airline was in fourth place in the traffic standings at the end of 2005. Continental has surpassed it each month in 2006.
``Being number four or five is not as important as being profitable,'' Trippler said. ``But that change is still a blow to Northwest. There's no ifs, ands or buts about it. It's a feather in the cap of Continental.''
Continental posted $985 million in losses in the past five years. This year, the Houston-based carrier is expected to earn $2.08 a share, the median estimate of four analysts surveyed by Thomson Financial.
It's been through bankruptcy twice, in 1983 and again in 1990, to reorganize and gain lower costs.
Among the benefits is a newer, more fuel-efficient fleet. Continental's planes are an average of 6.6 years old, compared with 17.6 years for Northwest, according to data compiled by Bloomberg. Fuel accounts for about 22 percent of Continental's operating expense, compared with about 24 percent for Northwest and 27 percent for American.
Continental's savings from operations include $500 million in pay and benefit concessions by employees last year.
``Because of their personal sacrifices, Continental was able to survive the tough times, avoid the fate of other airlines that are now in bankruptcy and embark on one of the most aggressive expansion plans in our history,'' said Julie King, a Continental spokeswoman.
Northwest may restore capacity after emerging from bankruptcy protection, Sbarra said. ``We'll have to wait and see how much of Northwest's cuts are temporary.''
The airline hasn't set a target date for emerging from Chapter 11, and it declined to comment on future capacity growth.
As Northwest contracts, the growth of Dallas-based Southwest is narrowing the gap between the two. If the carriers' traffic stays on its current pace, Southwest's traffic would be 99 percent of Northwest's by the end of 2006.
A move by Southwest into the top five carriers would be a first for a U.S. discount airline. Southwest has been profitable for 33 consecutive years and hasn't had a money-losing quarter since 1991, a streak unmatched in the industry.
Southwest is using lower fares to win passengers from larger rivals, particularly in markets where competitors reduce service, Sbarra said.
``Southwest is an animal all of its own,'' Trippler said.
Chicago Tribune
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