Struggling Continental seeks to save more than $430 million

Airline to add fees, cut service, ground planes


Continental Airlines, the fifth-largest U.S. carrier, continued an industry trend toward belt-tightening yesterday, announcing new passenger fees, service cutbacks, aircraft groundings and other measures intended to save $80 million this year and $350 million after that.

Continental, which has grounded 49 aircraft since the Sept. 11 terrorist attacks led to a falloff in air travel, said it would remove an additional 11 MD-80 aircraft from service by the end of the year. The airline previously reduced the types of planes it flies to four from nine.

Other actions include a new $20 fee for all domestic paper tickets, new and additional fees for services that low-fare customers select, an end to discounts in certain low-fare categories, strict enforcement of fare rules and policies against "waivers and favors," and collections of all fees for ticket changes and excess baggage.

Continental also said it would rebid many supplier contracts and alter employee programs, though it hoped to avoid layoffs through a hiring freeze, retirements, voluntary leaves and attrition.

But Chief Executive Officer Gordon M. Bethune left open the possibility that further actions could be taken, including job cutbacks.

"These are challenging times in our industry, and we need to do something now," he said in a statement. "US Airways declared bankruptcy, and United is likely to soon follow. American is eliminating 7,000 jobs."

American Airlines, the world's largest airline, announced the job cuts as well as the retirement of several aircraft and schedule changes last week. Also, on Aug. 14, United Airlines threatened to seek bankruptcy protection if its unions do not agree to deep wage cuts.

"While we remain committed to running a clean, safe and reliable operation," Bethune said, "we need to do some aggressive belt tightening so we don't end up like them. We're taking action both internally and externally, and all the steps we're taking today are necessary. Unless market conditions improve quickly, we'll be forced to make further changes in every aspect of our operation."

Continental shares rose 73 cents to close at $9.10 yesterday.

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