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Airlines weigh severance
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September 26, 2001: 5:27 p.m. ET
Continental says job cuts to cost $60M; some carriers try to avoid payments
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NEW YORK (CNNfn) - Continental Airlines said Wednesday it will stand behind all severance and furlough pay provisions included in its labor contracts, costing the carrier about $60 million, even as some other carriers are using emergency contract provisions to avoid such payments.
The nation's No. 5 carrier also said it reduced the number of jobs it expects to cut by 1,000 due to a voluntary leave of absence program. The carrier previously said it would furlough 12,000 employees, or about 20 percent of its staff, due to the sharp drop in air travel following the Sept. 11 terrorist attack.
The $60 million in payments won't be easy for Continental (CAL: down $0.70 to $14.75, Research, Estimates). In filings with the Securities and Exchange Commission the airline said it was late making $70 million in payments due Sept. 17 to holders of aircraft-backed certificates, although it said in a subsequent filing it had made the payments within a 10-day grace period provided in the certificates.
Still, Continental CEO Gordon Bethune said the airline believes it is proper to not fight the severance and furlough pay contract provisions.
"We believe that employees should always be treated with dignity and respect, especially when we are forced to make these tough decisions," Bethune said.
Continental, which was one of only two profitable airlines in the industry this year before the attack, said it will not make profit-sharing payments to employees this year.
Some airlines seek to avoid payments
But some of the nation's largest airlines are using clauses in its contracts about national emergencies or extraordinary circumstances to try to avoid making severance payments or offering enhanced early retirement.
AMR Corp. (AMR: down $0.40 to $18.24, Research, Estimates), the largest airline company and owner of American and Trans World Airlines, and No. 4 Northwest Airlines (NWAC: down $0.24 to $10.64, Research, Estimates) are among those avoiding those payments, although Northwest said it will provide health insurance benefits for laid off employees through year end and American is looking at a similar provision.
"In the past when we've gone through periods where we're eliminating jobs, we've tried to do it so it'll have as minimal an impact as possible," said Al Becker, spokesman for American. "In this instance, the financial situation is such we're just not able to do that."
The Allied Pilots Association, the pilots union that represents American pilots, said it is opposed to the company using the emergency clauses in the contract to avoid payments, generally equal to two weeks of pay for every year's of service.
The APA won additional no furlough guarantees from American when AMR purchased TWA earlier this year. But APA spokesman Gregg Overman said it is too soon to say what the union's response to American's actions would be.
Northwest said Wednesday that it will offer some pay based on seniority to 5,500 union employees who are furloughed, although a company spokesman admitted the pay, equal to one-to-six weeks of pay, will be less than the standard two weeks pay per year of service called for in the contract.
An additional 3,500 union employees have taken voluntary leave at Northwest, and 1,000 management employees are being furloughed as well.
AMR announced 20,000 job cuts last week, while Northwest announced 10,000 job cuts.
No. 3 Delta Air Lines (DAL: up $0.34 to $24.86, Research, Estimates) became the last of the nation's six largest carriers to announce job cuts when it said Wednesday morning it would cut 13,000 positions, or 16 percent of its staff. The move pushes industry job cuts to nearly 100,000 since the terrorist attack.
Delta, which is facing union organizing drives among both its mechanics and flight attendants, will use voluntary separation programs including buyouts, early retirement and long-term voluntary leaves, and will offer severance to those who are laid off.
Congress considered providing assistance for the employees affected by job cuts when it approved a $15 billion financial assistance package for carriers last Friday, but such help was not included in the final language of the legislation. Some legislators have vowed to include help for the employees in a bill now being considered that's aimed at improving airline security. 
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Delta cutting 13,000 jobs - Sept. 26, 2001
Airline losses could ground U.S. economy - Sept. 21, 2001
American parent and United to cut 20,000 jobs - Sept. 19, 2001
Airline executives warn of bankruptcies - Sept. 19, 2001
Airline stocks see steep selloff - Sept. 17, 2001
Continental slashes staff, flights - Sept. 15, 2001
Losses widen for airlines - July 18, 2001
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