Copyright 2004 PR Newswire Association LLC.All Rights Reserved. PR Newswire US December 14, 2004 Tuesday 10:08 PM GMT 1208 words Continental Airlines Finalizes Details on $48 Million of Management and Clerical Payroll and Benefit Reductions; Reductions Impact More Than 5,200 Management and Clerical Employees HOUSTON Dec. 14 HOUSTON, Dec. 14 /PRNewswire-FirstCall/ -- Continental Airlines (NYSE:CAL) today issued the following bulletin to update its employees on its ongoing efforts to return to profitability: Continental Airlines announced today that it has finalized changes to wages, work rules and benefits for most U.S.-based management and clerical employees as part of its previously announced $500 million reduction in annual labor costs. These reductions, which total $48 million annually, will take effect Feb. 28, 2005, and involve changes to wages and salaries, FLEX credits, vacation and holiday time, sick leave, and the 401(k) savings plan. The management and clerical group, which includes the company's 47 officers, is leading cost reductions by being the first work group to finalize details. "We realize that these changes will be difficult and painful for our management and clerical co-workers," Gordon Bethune, chairman and CEO said. "By facing these difficult decisions now, we can ensure Continental's long- term ability to survive." Continental is the last of the six major hub-and-spoke carriers to seek companywide pay and benefit reductions and work rule changes since September 2001. Continental has already implemented $1.1 billion in cost-savings and revenue enhancements without labor rate reductions. Salary and wage reductions Individual wage reductions are being implemented on a progressive scale, with lesser-paid employees receiving the smallest cuts. Managers will inform affected employees of their individual wage reductions, and beginning Dec. 16, most management and clerical employees will be able to view details of their specific wage and salary reductions on the Intranet. As previously announced, Larry Kellner, president and COO, will reduce both his base salary and his annual and long-term performance compensation by 25 percent. Executive Vice President Jeff Smisek, Marketing Executive Vice President Jim Compton, Executive Vice President and CFO Jeff Misner and Operations Executive Vice President Mark Moran will reduce both their base salaries and their annual and long-term performance compensation by 20 percent. Although no employee will be asked to reduce any 2004 compensation, Kellner and Smisek also will decline to accept their annual bonus if earned for 2004. Continental is modifying the Working Together Guidelines to reflect the changes, and they will be available online before year-end and through the Human Resources group. FLEX credit program Continental is eliminating the FLEX credit program, effective Dec. 31, 2004. Formerly, these FLEX credits provided management and clerical employees an additional 2 percent of their salaries. To offset the loss of flex credits in January and February 2005, Continental will provide employees a 2-percent salary credit for these two months. Vacation Regular vacation time accrued in 2004 for use in 2005 will remain the same. The new maximum vacation time will be four weeks for accruals beginning in 2005 for use in 2006. New vacation accrual schedule Years of service Maximum vacation days 1-4 years 5 days 5-9 years 10 days 10-19 years 15 days 20 or more years 20 days The company will continue to offer management and clerical employees the ability to purchase an extra week of vacation through payroll deduction. Holidays Continental has eliminated four of its 10 paid holidays in 2005 for management and clerical employees: the day after Thanksgiving, Christmas Eve and the two floating holidays. Sick leave Effective Feb. 28, 2005, the sick leave accrual rate for full-time employees will be six hours for each month of service, subject to current accrual caps. Part-time employees will accrue three hours of sick leave for each month of service. In addition, for each sick leave absence, employees will receive sick pay from their sick bank equal to 70 percent of their regular pay for the first three days of the absence. For sick leave days in each absence beyond the initial three days, employees will receive sick pay from their sick bank equal to 100 percent of their regular pay. 401(k) savings plan Effective Feb. 28, 2005, Continental will suspend the company match for the 401(k) savings plan for management and clerical employees. Enhanced profit-sharing programs As previously announced, Continental will launch enhanced profit-sharing programs that will enable eligible employees to share more significantly in the company's future success. Continental has terminated the previous profit-sharing plan. Continental will announce the specifics of the enhanced profit-sharing programs in the first quarter of 2005. Benefits that will continue Continental will continue to offer a broad spectrum of benefits to management and clerical employees, and those benefits are not expected to change significantly for 2005. -- Continental Retirement Plan -- Health and welfare plans (medical, dental, vision and life insurance) -- Employee pass travel privileges -- Employee Stock Purchase Plan -- On-time bonus program -- Perfect attendance program Ongoing discussions Continental continues to work with each of its other work groups to develop a package of wage and benefit reductions and work rule changes appropriate for each work group, as part of its previously announced $500 million of annual labor cost savings. Continental expects that the savings for each work group will be effective Feb. 28, 2005. This press release contains forward-looking statements that are not limited to historical facts, but reflect the company's current beliefs, expectations or intentions regarding future events. All forward-looking statements involve risks and uncertainties that could cause actual results to differ from those in the forward-looking statements. For examples of such risks and uncertainties, please see the risk factors set forth in the company's 2003 10-K and its other securities filings, which identify important matters such as terrorist attacks and international hostilities, domestic and international economic conditions, the significant cost of aircraft fuel, labor costs, competition and industry conditions including growth of low cost carriers, the demand for air travel, airline pricing environment and industry capacity decisions, regulatory matters and the seasonal nature of the airline business. In addition to the foregoing risks, there can be no assurance that the company will be able to achieve the needed payroll and benefits reductions and productivity improvements discussed in this bulletin, which will depend, among other matters, on successful discussions with employees and their representatives. Continental takes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report. Roger EWROPS