SWAjet

Continental Brings Labor Aboard

By Ross Snel
TheStreet.com Staff Reporter
2/28/2005

With time about to run out, Continental Airlines (CAL:NYSE - commentary - research) reached tentative agreements on wage and benefit concessions with several of its unions.

The airline said Monday it negotiated new contracts with its pilots, flight attendants, mechanics and dispatchers, meeting a goal of securing concessions with its labor groups by the end of February. The nation's fifth-largest airline did not disclose details of the new contracts, saying it wanted to give the unions time to explain them to members.

Continental now expects the wage and benefit reductions for all employees to become effective at the end of March.

The airline expects lower wages will help it meet its goal of saving $500 million a year, along with previously announced cuts. Airport ticket, gate, ramp and cargo agent employees already agreed to a $99 million cut; management and clerical employees agreed to $48 million of concessions; reservation workers agreed to $22 million.

The airline's board also has agreed to cut its fees by 30% and will forgo its stock-option grant this year.

The airline has now concluded its negotiation process with all employees, except some of its international workers.

Continental was the last of the U.S. network airlines to seek companywide pay cuts in the wake of the Sept. 11, 2001, terrorist attacks.

Airlines' revenue remains under pressure from overcapacity, fierce price competition and high fuel costs.

Shares jumped in after-hours trading following the announcement and were up 44 cents, or 4.1%, to $11.15.

737AV8R

Thought I'd chime in on this one as my first post here...

The TA that is up for ratification at CAL is by no means a "done deal." The union is doing the hard sell in the roadshows, and it may pass. But it also may not.

As some of you may know, CAL has their own forum restricted to Continental pilots. Typically that board is frequented by the, how should I say, more militant types from our pilot ranks. Myself included. When the TA first came out the outrage was deafening. But the roadshows have been recruiting some of the most militant chest thumpers, to my shock and disbelief. I first thought the TA would go down like Monica Lewinsky, but now I'm not so sure. When I see the staunch pilots from our forum rethinking their positions, I fear for the overall vote from our cross section at large.

Personally, I feel there is a better deal out there for us. But that overall mentality has been brow beaten by management and some of our union leaders. I would have guessed that 80% were against the TA on first view. Now I am clinging on to hope of staving off its success.

HSLD

Do CAL pilot's have membership ratification of changes to the CBA (or does the MEC decide)? Hopefully, CAL pilots will take the long view on any changes and get snapbacks or some other equity in return for pay and work rule changes.

No doubt the industry is on it's tail, although it's not a pilot's job or duty to underwrite cheap tickets for the traveling public.

Good Luck

737AV8R

Interesting that you ask that... we just recently ratified a resolution mandating that any "substantial" changes to work rules, pay, etc must be ratified by the membership. The MEC voted the TA acceptable enough, in their minds, to present it to the membership for ratification.

There are some potential upsides written in. I can't go into detail here, but in my view they are worthless unless the company makes serious money in the next few years. Something I doubt will happen. And if they do manage to make money, then why did they need our concessions in the first place?

Our current non-concessionary contract is worse than DAL's and NW's concessionary contracts... yet CAL wants about a 24% cut in overall pilot costs. I'm guessing enough of our guys will cave to pass it, but I'm hopeful I'm wrong. I think there's a better deal to be had.