Continental Airlines Curbs Flights to Mexico

The first U.S. airline is responding to the swine flu outbreak and panicked travelers.

Continental Airlines(CAL Quote) announced on Friday that it will temporarily pare down the number and size of U.S. flights to Mexico, in response to a sudden decrease in bookings to the country.

"We were already experiencing soft market conditions due to the economy, and now our Mexico routes in particular have extra weakness," Chairman and Chief Executive Larry Kellner said in a statement.

Continental will cut capacity to Mexico by 50% starting Monday, with about 40% fewer departures. The airline also changed its waiver policy, allowing customers with trips booked to Mexico to change their itineraries without penalty by the end of the month.

Prior to the announcement Continental ran an average of 450 flights a week to 29 destinations in Mexico.

Continental said it will continue to monitor demand levels and adjust capacity and costs accordingly.

Investors are waiting to see if other airlines such as American(AMR Quote) and US Airways(LLC Quote), two of the biggest carriers to Mexico, will follow Continental's lead.

Shares of Continental were up 1.6% in pre-market trading to $10.69.