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Continental will pare jobs, flights

It joins other airlines in making cuts to cope with soaring fuel costs.

June 06, 2008|From the Associated Press

Continental Airlines Inc. said Thursday that it would eliminate 3,000 jobs and trim capacity 11%, citing record fuel costs that have pushed the industry into its worst crisis since the 2001 terrorist attacks.

The airline also said its two top executives would forgo pay for the rest of the year.

Continental's payroll cuts represent about 6.5% of its workforce of 45,000.

Houston-based Continental said it would begin scaling back in September, when departures on its mainline operations will drop about 16% below September 2007 levels. Fourth-quarter capacity will fall 11%.

Shares of Continental rose 70 cents Thursday to $15.20.

The company said Lawrence Kellner, its chairman and chief executive, and Jeff Smisek, its president, would not take salaries or incentive pay for the rest of the year.

Last year, Kellner got a salary of $712,500 and total compensation that the company valued at nearly $6 million, down 9.3% from the year before, according to an Associated Press analysis of a company filing with the Securities and Exchange Commission.

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 last year and pushed Continental to an $80-million first-quarter loss.

In a statement, the company said it planned to offer details on flight and destination reductions and eliminations by the end of next week.

Fewer flights also will 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. It has already pulled six planes from service this year.

The company said several rounds of fare increases had proved insufficient to offset soaring fuel costs. Continental estimated that its expenses would be $2.3 billion more this year than last. Fuel has surpassed labor as Continental's biggest expense.

Many analysts consider Continental to be the healthiest of the six big network carriers, excluding low-fare Southwest Airlines Co. But that did not make it immune to cuts.

"If they did not do it they would be irresponsible," said Ray Neidl, an analyst with Calyon Securities. "At current fuel prices, the old economics do not work. Ticket prices have to rise dramatically."

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