Both Continental Airlines (NYSE: CAL) and Southwest Airlines (NYSE: LUV), the two most financially-secured airlines have hit turbulence in the wake of the rising gas prices.  The basic equation shows that as fuel prices sky-rocket, the airlines hit turbulence and will have to ground themselves, if you will.  Southwest has been one of the only airlines to see profits for the last several quarters.  However, the company has finally seen the same turbulence that has been giving other major airline carriers financial problems due to such high fuel costs.

Continental and Southwest Airlines will both attempt to fight the fuel battle by raising prices.  Southwest Airlines Co. which always has deals for travelers for its select domestic locations had to raise its summer prices last week, only then to raise them an additional $10  for flights each way from mid-June through mid-August.  In addition to raising prices, Southwest will have to postpone their plans for fleet expansion.  

The leading low-cost carrier Southwest Airlines Co., headquartered out of Dallas, Texas, has been the only airline company to see a profit this first quarter.  The company’s revenue rose 15.1% to $2.53 billion.  Although the company had reported a profit, they still saw a decline in their numbers as they earned only $34 million, or 5 cents per share, in the first quarter compared with $93 million, or 12 cents per share, a year earlier.

Continental Airlines, the fourth-largest airline carrier by passenger volume, has reported a first-quarter net loss of $80 million, or 81 cents a share, compared with net income of $22 million, or 21 cents a share, a year ago.  Due to the Houston-based company’s large international traffic, Continental’s revenue rose 12% to $3.57 billion.

Continental claims that they will take 14 older, less fuel-efficient aircrafts out of service.

Continental, in addition, will remove 34 of its older fleet of Boeing 737-300’s. Continental’s reduction of their older fleet will reduce the U.S. mainline capacity by 5% this upcoming Fall. “In this fuel environment, we must reduce our domestic capacity to help reduce our losses in the domestic system," said President Jeff Smisek.  Continental and Southwest Airlines will be cutting seat capacity to reduce routes that aren’t providing the airline companies with sufficient funds.  This is a first among U.S. airlines this year to trim domestic capacity even if it cuts their share of the market.

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