DALLAS -- Continental Airlines plans to cancel flights rather than risk stiff fines under new federal rules designed to punish carriers for delaying passengers.
CEO Jeff Smisek said Tuesday that the result will be that passengers will have more trouble getting to their destinations.
A spokesman for the U.S. Transportation Department said airlines can avoid fines by doing a better job of scheduling flights and crews.
Under a Transportation Department 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 them. Smisek said at an investor conference in New York that long delays are rare and are mostly caused by an outdated air traffic control system that the government has failed to upgrade.
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Airline industry officials say they should be allowed to decide whether to wait out delays, even if the delays exceed three hours.
Smisek said many passengers on delayed flights "really want to go to L.A. 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 another flight. Passengers, he said, won't get to their destinations "for maybe days."
Transportation Department spokesman Bill Mosley said the new rules will help consumers pick airlines that don't have tarmac delays or that routinely cancel flights.
"Carriers have it within their power to schedule their flights more realistically, to have spare aircraft and crews available to avoid cancellations" and to rebook passengers when there are cancellations, Mosley said.
The new rules 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 Transportation Department imposed its own 3-hour rule.
For a full medium-size plane such as a Boeing 737, fines could top $3.5 million per flight, and they would be much higher on bigger planes used for international flights.
At the same investor conference, Continental estimated that it will take in $350 million this year from fees on checked bags -- a 30 percent jump from the $270 million it raised last year.
Continental recently raised its fees to $25 for the first checked bag and $35 for the second, although elite frequent fliers and some other customers are exempt.
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 compared with Delta, which acquired Northwest to become the world's largest airline.