- The Washington Times - Friday, June 6, 2008

DALLAS (AP) | Continental Airlines on Thursday became the latest airline to announce cutbacks, saying it will shed 3,000 jobs - more than 6 percent of its work force - and reduce capacity by 11 percent this fall.

The industry is battling record fuel costs that have pushed it into its worst crisis since 2001.

As another result, Continental said its two top executives will forgo pay the rest of this year.

The Houston-based airline said recent fare increases have not covered the cost of fuel, which has nearly doubled in the past year. Continental estimates it will spend $2.3 billion more on fuel this year than last - a difference of $50,000 per employee. Fuel has surpassed labor as Continental’s biggest expense.

In a memo to employees, Continental Chief Executive Officer Lawrence Kellner and President Jeffrey Smisek said at current fuel prices Continental is losing money on “a large number of our flights.” As fares rise, fewer people will fly, and “we will need fewer employees to operate the airline,” they stated.

The executives said they expect most of the 3,000 job cuts will be handled through voluntary buyouts to limit layoffs. They didn’t rule out more job losses.

Unions were positioning to limit layoffs. Mark Adams, a spokesman for Continental pilots, said he hoped the company would offer attractive buyouts to those near the previous retirement age of 60 so that younger pilots could keep their jobs.

Mr. Kellner and Mr. Smisek said they will not take salaries or incentive pay the rest of the year. In a regulatory filing, the company said Mr. Kellner, who was paid a salary of $712,500 last year, would get $296,875 this year, and Mr. Smisek’s salary would be cut to $240,000 from $363,300.

Mr. Kellner’s total compensation last year was valued at nearly $6 million, according to an Associated Press analysis, although about one-third 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.

Many analysts consider Continental to be the healthiest of the six big network carriers, a group that excludes low-fare Southwest Airlines Co. But that did not make Continental immune from cuts - the airline still lost $80 million in the first quarter after earning a profit last year.

On Wednesday, UAL Corp.’s United Airlines, the nation’s No. 2 carrier, announced it would cut up to 1,100 more jobs, ground 70 airplanes and drop its coach-only service, named Ted. Two weeks ago, American Airlines, the nation’s largest airline, said it would cut capacity 11 percent to 12 percent after the peak summer travel season and probably eliminate thousands of jobs, though it hasn’t given an exact figure.

Delta Air Lines said in March it would cut U.S. capacity about 10 percent in the second half of 2008. Northwest Airlines , which Delta is buying, has announced smaller reductions, and a Northwest spokeswoman said further moves were being reviewed.

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