Continental Airlines seeks $500m in labour savings

Continental Airlines said it would seek $500 million in annual wage and other concessions from its workers to avert more losses largely caused by record high fuel prices.

"This is a difficult and painful decision, but we need to take this action now, before we find ourselves in a severe crisis," Continental Chief Executive Gordon Bethune said in a statement.

"While a competitive financial analysis would support our asking for substantially larger reductions, $500 million is the absolute minimum we need to be a survivor," Mr Bethune said.

Houston-based Continental said the austerity measures aimed at workers follow $1.1 billion in yearly cost savings and revenue enhancements that were previously announced.

Continental reported a net loss of $157 million for the first nine months of 2004 and projects more red ink in 2005.

The airline has resisted employee givebacks during the industry's financial slide, which was accelerated by the September 11, 2001, attacks on the United States. But cost-cutting drives and unprecedented steps to force savings on workers at some of Continental's biggest rivals this fall have put new pressure on the No. 5 carrier to turn to its employees for help.

Earlier this month, Delta Air Lines won $5 billion in concessions over five years from its pilots to avert an immediate Chapter 11 filing, and US Airways received approval from a bankruptcy judge in October to cut worker pay by more than 20 per cent through mid-February.

United Airlines, like US Airways, is threatening to throw out labor contracts and dump expensive pension plans in bankruptcy court to get deeper savings from its thousands of unionised workers.

With business picking up this year, experts point to soaring fuel prices - with crude above $50 per barrel this fall - and high labor costs as the reasons for the newest round of losses at the biggest airlines. The situation is more severe at the biggest airlines because they have had to slash fares to compete with discounters, which as a group have much lower labor costs.

The seven biggest US airlines lost more than $5 billion through the third quarter of this year.

"If fuel had not jumped, Continental had no intention of going after its employees," said Michael Boyd, an aviation industry analyst based in Evergreen, Colorado. "It's a last resort."

Continental said it is discussing concession packages covering pay cuts, as well as changes in benefits and work rules with its labor groups. The airline wants to have savings in place by February 28, 2005.

Unionised workers would have to ratify any concession agreement.