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Continental Will Close LAX Facility by Next Week : Airlines: The carrier will eliminate 1,500 jobs at its maintenance hangar in an effort to improve earnings.

November 08, 1994|JAMES F. PELTZ | TIMES STAFF WRITER

Continental Airlines, seeking to shore up weak earnings, said Monday that it plans to close its aircraft maintenance base at Los Angeles International Airport, eliminating 1,500 jobs by next week.

The airline also closed a maintenance facility in Denver on Monday, eliminating 140 jobs there.

Continental said it plans to shift the bases' work to outside contractors, saving about $30 million a year. Many of those contractors will be located in the East, where the airline's routes have increasingly shifted during the past year.

"This decision, while painful because of its impact on our people, is a necessary one," George L. Mason, vice president for technical operations, said in a statement.

The shutdown was not unexpected, because Houston-based Continental had said last week that it was considering whether to shift its LAX maintenance operations to Eastern locales. The LAX workers, who are not represented by a union, earn an average of $31,000 a year, Continental spokesman Ned Walker said.

One Continental mechanic at LAX who asked not to be identified said that "everyone (at the base) is furious," because Continental had indicated the work might stay within Continental and that the workers might get transfers to maintenance bases in Houston or Orlando, Fla.

Instead, "we are all laid off as of Friday," the mechanic said in a telephone interview.

The employees will be paid through Jan. 6 and receive help finding other work at Continental or outside the company. Overall, Continental employs 3,300 at LAX and 41,800 worldwide.

The maintenance workers learned of the decision in a memorandum distributed early Monday. Continental told them that because of ongoing fare wars in the airline industry, "we must continue to reduce costs to the extent that the current yields," or average ticket prices, "make us profitable."

Although the move means layoffs, the memo says, they are necessary if the airline is to "focus on what is best for the majority of Continental employees and the interests of our shareholders."

Continental, the nation's fifth-largest airline in terms of passengers flown, was based in Los Angeles before moving its headquarters to Houston in 1982. Its LAX maintenance work is performed at a 60-acre hangar facility at the west end of the airport on property leased from Los Angeles.

The city Airports Department declined to comment on Continental's move, except to reiterate remarks made last week by Deputy Executive Director Philip Depoian, who said Continental was making a business decision and not reacting to any rent dispute with the city.

Continental, which emerged from its second reorganization under U.S. Bankruptcy Court protection in April, 1993, in effect split itself in half last year by launching Continental Lite, a low-fare, short-haul service concentrated on the East Coast.

But the new service has yet to break even. And at a time when most airlines are reporting their best financial results in years, Continental late last month posted only a modest third-quarter profit of $30.6 million on revenue of $1.5 billion, including a $23.4-million one-time gain. In the first nine months of this year, Continental lost $89.9 million on revenue of $4.3 billion.

On the day those results were announced, Robert R. Ferguson III abruptly resigned as vice chairman and chief executive, reportedly under pressure because of the displeasure of the carrier's board with Continental Lite's performance.

Ferguson was succeeded by Gordon Bethune, who said last week that Continental Lite would pare its service by at least 20% to help push the operation into the black.

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