Continental Airlines Says Labor Costs Still a Problem

Continental Airlines said Tuesday that despite recent worker concessions, its labor costs may not be competitive with some other carriers.

In a regulatory filing, Continental said labor costs made up 23.6 percent of its total operating expenses in 2005, which it called "significant."

"We believe that our wages, salaries and benefits cost per available seat-mile will continue to be higher than many of our competitors," the Houston-based carrier said.

A Continental spokesman, asked whether further concessions would be needed, noted Tuesday that the airline has said it would stick with the concessions it had already achieved.

Wages, salaries and related costs decreased 6 percent in 2005, primarily because of pay and benefit reductions and work rule changes, the carrier said. However, that was partially offset by more hiring.

That percentage, however, did not include concessions recently agreed to by Continental's flight attendants. Members of the flight attendants union voted in January to approve concessions worth $72 million, becoming the last major union to approve proposed cuts.

Continental has gotten $490 million in concessions from employees. The airline said it expects to get the final $10 million of its $500 million goal from overseas workers in the near future.

Continental said in the filing - its annual financial report with securities regulators - that major carriers it competes with have made significant labor cost reductions, both in and out of bankruptcy courts.

Those carriers include Delta Air Lines and Northwest Airlines, which are in bankruptcy, and carriers recently emerged from bankruptcy, including US Airways and United Airlines.

"Carriers in bankruptcy are able to achieve substantial cost reductions through, among other things, reduction or discharge of debt, lease and pension obligations, and wage and benefit reductions," Continental said in the filing.

Continental also said that like its competitors, it has a high proportion of debt compared with equity.

At the end of 2005, it had $5.6 billion of long-term debt and capital lease obligations; $546 million will come due in 2006.

The carrier said it expects to incur a significant loss for the first quarter of this year because of a continued difficult fare environment and high fuel costs.



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