Houston-based Continental Airlines — one of the city’s largest employers — announced Thursday that it is asking employees for reductions in pay and benefits effective Feb. 28 of next year as a part of a plan to reduce its annual costs by half a billion dollars.
Continental expects the savings to be generated from a combination of productivity enhancements, benefits changes and wage reductions with each employee group. The cuts would be in addition to $1.1 billion in annual cost savings and revenue enhancements that Continental announced previously this year.
However, even with the cuts, Continental does not expect to return to profitability unless there is a change in the current economic conditions that are depressing the airline industry. Continental has lost about $160 million through the first three quarters of this year and will likely lose more in the fourth quarter. All airlines have been coping with a glut of seats and high fuel prices over the past year, and traditional hub-and-spoke carriers such as Continental have been facing increased competition from discount airlines such as JetBlue Airways and Southwest Airlines. Although relatively healthy in comparison to the reeling legacy airlines, Continental is the last of the “big six” hub-and-spoke airlines to request such employee concessions after the terrorist attacks of 2001 on New York and Washington.
As a part of the plan, Continental President and Chief Operating Officer Larry Kellner agreed to cut both his base salary and annual and long-term performance compensation by 25% effective Feb. 28. Mr. Kellner will replace Gordon Bethune as chairman and CEO of Continental at the end of this year. Likewise, other top Continental management personnel will take similar reductions in compensation and benefits as a part of the plan.