updated 9/2/2004 1:22:24 PM ET 2004-09-02T17:22:24

Continental Airlines Inc. plans to eliminate about 425 management and clerical jobs, and wage cuts may be next if the revenue picture does not improve, the No. 5 U.S. carrier said on Thursday.

The airline, which has been holding on-again, off-again contract talks with pilots since 2002, said the job cuts are its latest attempt to reduce its losses without asking for wage and benefit concessions from employees.

“We continue to struggle to identify additional ways to lower our costs as continued losses jeopardize our survival,” Gordon Bethune, chairman and chief executive, said in a statement. “Unless the revenue environment improves dramatically, we will need to reduce wages and benefits to compensate for the continued losses.”

The company is not currently in discussions with its union employees about possible salary cuts, said Continental spokesman David Messing.

The majority of the job cuts will come from “headquarters-level positions in Houston,” said Messing. He was not able to specify what percentage of cuts would occur in the clerical area and what percentage would come from management.

The job cuts, along with earlier reductions, means the airline has slashed its work force by 24 percent since Sept. 11, 2001. Currently, the airline has 42,000 employees.

The cuts, which will come through layoffs, attrition and the elimination of unfilled positions, are expected to save $125 million in 2005. When fully implemented by 2007, the savings will be $200 million a year.

“Airlines are finally waking up and realizing their current (business) models aren’t working, so they’re laying off people, cutting services -- they’re adapting,” said Craig Hodges, a fund manager at Hodges Capital Management, which oversees $350 million. “You hate to see people lose their jobs, but it’s part of the necessary strategy a company has to go through to survive.”

Though job cut announcements can send a company’s shares higher, Continental shares were unchanged, signaling that investors remain wary.

“The market is still telling you they have a long way to go to resolve their problems,” said Hodges, whose firm holds shares of AMR Corp. and Southwest Airlines Inc.

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