Continental Swings Ax, Cuts 3,000 Jobs

Continental Airlines Inc. said Thursday it is cutting 3,000 jobs and reducing capacity in the fourth quarter by 11 percent, citing record fuel costs and an industry in "crisis."

Also, the company's chief executive and president say they will not take a salary for the rest of this year and will decline bonuses. The cuts represent about 6.5 percent of the company's total staff of 45,000.

The carrier said it will start pulling back on flights in September, when it expects mainline departures will be down about 16 percent year-over-year. This will result in a total capacity reduction of about 11 percent.

By the end of the second quarter, Continental will operate 375 mainline aircraft. Houston-based Continental plans to take 67 planes out of service through 2009.

Continental said it will provide details on specific flights subject to cuts by the end of next week.

The company said that several fare increases have not been enough to offset the rising cost of fuel. With the price of jet fuel at about 75 percent higher than it was a year ago, Continental estimates it will spend $2.3 billion more this year than last.

"These actions are among many steps Continental is taking to respond to record-high fuel prices as the industry faces its worst crisis since 9/11," the company said in a statement.

Continental becomes the latest airline to make sharp cutbacks. On Wednesday United Airlines set plans to take 70 more jets out of service and cut domestic capacity by 17 to 18 percent in 2008-09. That came two weeks after a similar move by AMR Corp.'s American Airlines, which said it would slash domestic capacity 11 to 12 percent after the peak summer travel season.

"We have to make dramatic changes and some of those changes are not going to be terribly popular with our customers," Jim May of the Air Transport Association told CBS News correspondent Nancy Cordes.

Flight reductions may manifest themselves in the elimination of service to secondary airports in major cities, where major carriers often have to compete with low cost airlines. Delta Airlines is pulling out of Islip, New York; Continental is leaving Chigago Midway; and American is withdrawing from Oakland, California.

And while the major airlines have raised fares 12 times this year, some industry analysts say steeper hikes are still to come.

"I would say 20 [or] 25 percent higher is not impossible," said Mo Garfinkle of GCW Consulting. "And probably likely."