Continental Airlines to cut 3,000 jobs, capacity
DALLAS » Continental Airlines
said yesterday it is cutting 3,000 jobs and reducing capacity by 11 percent, citing record fuel costs that have pushed the industry into its worst crisis since 2001. It also said its two top executives will forgo pay for the rest of the year.
The job cuts represent about 6.5 percent of the company's work force of 45,000.
Houston-based Continental said it will begin pulling back on flights in September, when departures on its mainline operations will drop about 16 percent below September 2007 levels. Fourth-quarter capacity will fall 11 percent.
Continental has five daily flights between the mainland and Honolulu, as well as five flights a week that are operated by its Continental Micronesia subsidiary. The company has 147 employees based in Honolulu who work for the two operations.
The company also said yesterday that Chairman and Chief Executive Lawrence Kellner and President Jeff Smisek will 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 percent from the year before, according to an Associated Press analysis of a company filing with the Securities and Exchange Commission.
However, about one-third of Kellner's compensation was in stock and option grants that are now worth far less than they were when granted in February 2007 because of the slump in the company's stock. In a filing yesterday, the company said 2008 salaries would be $296,875 for Kellner and $240,000 for Smisek.
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 past year and pushed Continental to a loss of $80 million in the first quarter.
In a statement, the company said it plans 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 this year.
The company said that several fare increases have not been enough to offset the rising cost of fuel. Continental estimates it will spend $2.3 billion more this year than last - a difference of $50,000 per employee. Fuel has surpassed labor as Continental's biggest expense.
"These actions are among many steps Continental is taking to respond to record-high fuel prices as the industry faces its worst crisis since 9/11," the company said in a statement.