Continental to Retire Planes, Cut Jobs

Updated from 2:55 p.m. EDT

Continental(CAL Quote) became the latest airline to announce cutbacks in its schedule, saying it will chop fourth-quarter domestic mainline capacity by 11%, resulting in about 3,000 job losses.

"The airline industry is in a crisis," said CEO Larry Kellner and President Jeff Smisek, in a letter to employees on Thursday. "Its business model doesn't work with the current price of fuel and the existing level of capacity in the marketplace. We need to make changes in response."

At current prices, Continental said it would pay $2.3 billion more for fuel this year than last year, or about $50,000 per employee.

In response, the carrier plans to retire 67 older Boeing 737s. Of those, 37 will occur this year, including 27 by September, with 30 more in 2009. Six 737s have already been taken out of service this year. By the end of 2009, Continental will no longer have any 737-300s in its fleet.

The retirement of older gas guzzlers is being accompanied by deliveries of new, fuel-efficient 737-800s and 900s, with 16 deliveries scheduled for this year and 18 more in 2009. Nevertheless, the mainline fleet will shrink from 375 at the end of the second quarter to 356 in September and 344 at the end of next year.

Continental, which has about 45,000 workers, said most of the job losses will occur through voluntary programs. It said Kellner and Smisek will decline their salaries for the rest of the year and will also turn down 2008 incentive payments.