Continental Airlines (CAL) expects to be making an announcement on its new fee-for-departure partner relatively soon, according to officials speaking at its second quarter conference call last week. However, it is clear that the growth in long haul and international capacity will likely come at the expense of regional flying as it seeks to address capacity constraints at its hubs.

At Newark, for instance, it told investors it still had 200 RJ flights per day. "As we look at international and long haul growth, while all our markets are important to us," said an official, "using the same runway time for an RJ versus a Shanghai or long haul flight, we feel we have a lot of room for more capacity growth there."

The airline also noted that its deliveries for next year, narrow bodies, allow it to "up-guage" from the regional jets to address capacity constraints. Having a few less RJs and a few more narrowbodies mean fewer departures, it said, concluding it has plenty of room to grow both at Newark and Houston both for the mainline and in ASMs. "Clearly a long haul flight can produce a tremendous amount of ASMs with just one take off and landing," officials said. CAL indicated it is fairly close to the end of the RFP process and described the discussions it has had to date with providers as a very vibrant market. It has indicated it would probably replace only 40 to 50 of the 69 aircraft that were retained by Express Jet (XJT)after having 25 percent of its Continental Express service pulled by the major carrier. (RAN, May 15, p.1)

Express Jet's decision, said Continental, allowed it to revisit its entire growth strategy, especially at the regional level. (RAN, June 12, p.1) Its plans now call for it to grow the mainline carrier rather than regional operations.

"We want to be a little smaller on the regional side," said officials during the conference. "We will grow the mainline operations and then grow the regionals around that. We want to make sure we have the right feed and the right number of departures at our hubs."

The 50 seater may not be the perfect alternative versus larger regional jet, it said, adding it still has 60-plus 114-seat 737s which allow it to up-guage its flights. The airline indicated that, at 274 units, it probably has more 50-seat RJs than it wants so it will pull that back somewhat. It is focused on building flexibility. It would not comment on the prospect of a 70-seat turboprop, saying only that it was an interesting aircraft and they have spent a lot of time looking at it, but would leave it at that until they are ready to make a fee-for-departure announcement.

In response to a question, the airline also said that demand is strong across the system and, as yet, sees no evidence that people are abandoning their cars and higher gas prices, for airlines in the short-haul markets.

The airline expects its regional operations to have a two- to three-percent load factor growth in the third quarter on a 13.2 percent increase in capacity. For the full year, Continental is expecting regional capacity to grow by 12 percent.