updated 2/28/2005 7:30:01 PM ET 2005-03-01T00:30:01

Continental Airlines reached its goal of finding $500 million in annual savings by Monday with the announcement of tentative agreements for wage and benefit cuts with unions representing pilots, flight attendants, mechanics and dispatchers.

The Houston-based carrier with 41,000 employees announced the tentative contract agreements Monday, but revealed no details so the unions could spread the word directly to their members. The pacts are subject to union leadership approvals and ratification by each work group. Results are expected by the end of March.

Union representatives said the proposed 45-month pacts address concerns about job security and pensions while addressing the company’s desire to stave off a potential cash crunch, layoffs and deeper payroll cuts in light of soaring jet fuel costs.

“Company management set a goal of today to reach an agreement. This gave the pilots strong leverage to accomplish our goals,” pilot Jay Panarello, chairman of the master executive council of Continental’s pilots’ union, said in a statement Monday. “We were willing to help our company, but only on terms acceptable to the pilots.”

“This agreement addresses our members’ economic and job security issues while considering the company’s fragile financial condition,” said William Driscoll, president of the International Association of Machinists and Aerospace Workers District 142, which represents Continental’s flight attendants.

The International Brotherhood of Teamsters, which represents Continental’s mechanics, said in a statement that its pact addresses health insurance caps, protections in the event of a bankruptcy filing, furlough protection, stock options, profit sharing and wage escalators.

“We feel that progress was made in these areas,” the union said.

Continental already had identified $169 million in wage and benefit cuts from nonunion employees, such as those in management, reservations, and food services, as well as workers in clerical jobs and domestic airport ticket, gate, ramp, operations and cargo agent workers.

The proposed pact with pilots would save $200 million, and the rest would come from concessions with the other unions and some Continental Micronesia and international workers.

The $500 million in yearly savings doesn’t include the non-cash costs of about 10 million stock options the company said Monday it would issue to most employees in connection with the wage and benefit cuts. Chairman and Chief Executive Larry Kellner said the stock option grants, which will not be made to officers and directors, “will give employees a meaningful stake in the company’s future success.”

Continental, the nation’s fifth-largest carrier, was the last of the nation’s major carriers to seek such concessions after squeezing $1.1 billion in savings and revenue enhancements.

Clark Orsky, an analyst with KDP Investment Advisors, said Continental held off as long as possible.

“The next item to cut is labor. Continental can’t compete with everyone else unless it pays market wages, which are headed down,” Orsky said. “This is just part of an industrywide phenomenon.”

The airline expects to achieve about $500 million a year in savings if the agreements are implemented.

“I know a reduction in pay and benefits is painful. However, these agreements, along with the reductions from the rest of our work groups, will put in place the tools we need to be successful and grow our company, securing the careers and retirement of all Continental employees,” Kellner said in a statement.

The $500 million is about 16 percent of Continental’s spending on wages, salaries and related costs. The company reported last month it lost $363 million, or $5.55 per share, in 2004.

Continental shares fell 18 cents, or 1.7 percent, to close at $10.71 Monday on the New York Stock Exchange. The stock has traded in a 52-week range of $7.63 to $15.49.

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