IE 11 is not supported. For an optimal experience visit our site on another browser.

Continental warns of larger cuts

Continental Airlines Inc. would slash $300 million in salaries and benefits, shrink its fleet, furlough workers and cancel new jet orders if unions don't accept new contract terms, the carrier said Tuesday.
/ Source: The Associated Press

Continental Airlines Inc. would slash $300 million in salaries and benefits, shrink its fleet, furlough workers and cancel new jet orders if unions representing pilots, flight attendants, mechanics and dispatchers don’t ratify new agreements for further cost savings, the carrier said Tuesday in its annual regulatory filing.

The company also warned of a “significant loss” for 2005, but said in the filing that its projected cash flows and reserves will be sufficient to carry it through the year if its employee unions approve the cuts. Continental said it needs the new contracts to be ratified by the end of the month.

Last month, Houston-based Continental announced it had gotten $500 million in annual savings with the announcement of the tentative 45-month pacts with unions. Representatives of those groups said the proposed deals 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.

The unions said they would share details with members and each expected to vote on whether to ratify the tentative agreements by the end of this month.

Jim Moody, spokesman for the union representing Continental pilots, declined comment. Representatives for the other unions either declined comment or didn’t respond to requests for comment.

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 of the $500 million would come from concessions with the other unions and some Continental Micronesia and international workers.

Continental said in the filing that if the unions don’t ratify the deals — or if one rejects its pact while others approve theirs — none will go into effect and the airline will have to take other measures to cut costs.

Those steps include:

  • $800 million in annual pay and benefit reductions, or an additional $300 million. Continental spokesman Dave Messing said the carrier also would have to seek approval from unions for the greater amount.
  • Shrink the fleet. Continental would sublease or sell 24 Boeing 737-500 aircraft with help from aircraft broker Focus Aviation Inc.; cancel plans to lease eight 737-300 Boeing aircraft; postpone accelerated 2006 delivery of six 737-800 Boeing aircraft to the original 2008 delivery dates; cancel orders for 10 new Boeing 787 aircraft; and discuss with Boeing deferral of all 40 remaining aircraft on order that are scheduled for delivery beyond 2005.
  • Furlough a “significant number” of employees in conjunction with a reduced fleet, though the airline didn’t specify how many workers would be affected.