Continental Airlines to Seek Reductions of Up to $500 Million in Annual Wages, Benefits
HOUSTON (AP) -- Continental Airlines Inc. on Thursday said it will seek to cut $500 million in annual wages and benefits on expectations of losing "hundreds of millions of dollars" this year.
The reductions, scheduled to take effect on Feb. 28, are in addition to $1.1 billion in cost savings the company has already identified, Continental said. The airline until now has avoided asking for concessions from its workers, a move several peers have made in an effort to stay afloat as high fuel prices and declines in air travel continue saddling the industry.
"Continental must adjust its costs to a level that will let it survive and grow," Continental said in a statement. "Otherwise, it will have no prospect of returning to profitability under prevailing market conditions."
The company said it will meet with each of its work groups to discuss a package of changes that are "appropriate" for each particular segment, and added that most of the savings are expected to come from changes in benefits and productivity enhancements.
Wages will be cut on a progressive scale, with lesser-paid workers asked to forfeit a lesser amount, Continental said.
"This is a difficult and painful decision, but we need to take this action now, before we find ourselves in a severe crisis," chairman and chief executive Gordon Bethune said in a statement.
President and chief operating officer Larry Kellner, who becomes chairman and CEO at the end of the year, has agreed to reduce his base salary and long-term performance compensation by 25 percent as part of the cuts.
He and executive vice president Jeff Smisek, who took a 20 percent pay and compensation cut, will forfeit their annual bonuses if they are earned for fiscal 2004, the company said.
Executive vice president of marketing Jim Compton, executive vice president and chief financial officer Jeff Misner and executive vice president of operations Mark Moran also have agreed to reduce their base pay and compensation rates by 20 percent.
Shares of Continental ended the day up 1.5 percent, or 17 cents, at $11.35 after trading on the New York Stock Exchange.