Airline's pacts help 787s deal

Tuesday, March 1, 2005

By JAMES WALLACE
SEATTLE POST-INTELLIGENCER AEROSPACE REPORTER

Continental Airlines announced yesterday that it has reached tentative agreements with its unions that will help it slice annual costs by about $500 million, which clears the way for the board to approve an order for 10 Boeing 787 Dreamliners.

The airline had said in late December, when it announced the 787 order, that it was conditional on reaching an agreement on the cost cuts by the end of February.

"The Boeing Co. and Continental have agreed to extend for one month the period for board approval of their previously announced aircraft acquisition agreement," Continental said in statement yesterday.

Although Boeing has nearly 200 firm orders or commitments for its 787, Houston-based Continental, the nation's fifth largest carrier, is the only major U.S. carrier to commit to the fuel-efficient, twin-engine, 250-passenger plane.

Other major U.S. carriers are eventually expected to order the jet, but they need to first start making money again. U.S. airlines were hit harder by the industry's downturn than airlines in Europe and Asia that have placed the bulk of the 787 orders.

The 787s would be delivered to Continental starting in 2009, provided the board gives its approval as expected. That's one year after the 787, formerly known as the 7E7, is scheduled to enter airline service.

In addition to the 787 orders, the board must also approve the accelerated delivery of six Boeing 737-800 jets into 2006. They were to be delivered in 2008.

Continental also plans to lease eight 757-300 jets starting this summer, provided the board gives the OK.

The deal with Boeing is part of a plan by Continental to beef up its international business. The 787s would be used on international routes.

Continental, like most other U.S. carriers, has continued to lose money, partly because of record-high fuel prices. The airline reported a $206 million fourth-quarter loss. The $500 million in employee concessions is needed to help stem the losses, Continental has said.

The tentative agreements were reached with the airline's pilot and flight attendant unions, as well as machinists and dispatchers.

The agreements are subject to union ratification.

Continental said the wage and benefit reductions would begin at the end of March.

"I know a reduction in pay and benefits is painful," Chairman and Chief Executive Larry Kellner said in a statement.

"However, these agreements, along with the reduction from the rest of our work groups, will put in place the tools we need to be successful and grow our company."

Kellner replaced Gordon Bethune, who retired as chief executive at the end of 2004. One of his last official acts at Continental was to announce the tentative 787 order.

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