Continental Airlines to cut 3,000 jobs

June 5, 2008 6:00:58 PM PDT
Continental Airlines Inc. said Thursday it is cutting 3,000 jobs and reducing capacity in the fourth quarter by 11 percent, citing record fuel costs that have pushed the airline industry into a "crisis." Letter to employees: Read the letter sent to Continental employees

The company also said Chairman and Chief Executive Lawrence Kellner and President Jeff Smisek will not take salaries or incentive pay for the rest of the year.

The job cuts represent about 6.5 percent of the company's work force of 45,000.

Houston-based Continental said it will begin pulling back on flights in September, when departures on its mainline operations will be about 16 percent below the numbers of September 2007. For the year, capacity will fall 11 percent.

CEO Kellner will give up part of a hefty compensation package. In 2007, his salary was $712,500, according to a filing with the Securities and Exchange Commission.

Kellner got a $3.3 million incentive payment, stock and options grants that the company valued at nearly $1.94 million when they were issued in February 2007, and $45,196 in other compensation. Continental becomes the latest airline to make major cuts as the carriers try to cope with record high fuel prices, which have nearly doubled in the past year and pushed Continental to a loss of $80 million in the first quarter.

Continental officials did not immediately respond to calls for more comment. In a statement, the company said it plans to offer details on flight and destination reductions and eliminations by the end of next week.

Fewer flights will also mean fewer planes. By the end of the second quarter, Continental will operate 375 mainline aircraft and it plans to mothball 67 planes through 2009.

The company said that several fare increases have not been enough to offset the rising cost of fuel. Continental estimates it will spend $2.3 billion more this year than last.

"These actions are among many steps Continental is taking to respond to record-high fuel prices as the industry faces its worst crisis since 9/11," the company said in a statement.

Continental becomes the latest airline to make sharp cutbacks.

On Wednesday, UAL Corp.'s United Airlines, the nation's No. 2 carrier, announced it would cut up to 1,100 more jobs, ground 70 airplanes and drop its coach-only service, named Ted. Two weeks ago, AMR Corp.'s American Airlines, the nation's largest airline, said it would cut capacity 11 percent to 12 percent after the peak summer travel season and probably eliminate thousands of jobs, though it hasn't given a figure.

Some analysts have called on U.S. carriers to shrink about 20 percent to cut spending on fuel and labor. Industry executives say that would also drive up fares as passengers compete for fewer seats in the air. It could also mean the reduction or elimination of service to some smaller airports.

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