Continental Airlines Reaches Tentative Agreements

Continental Airlines today
issued the following bulletin to its employees announcing that it has
reached tentative agreements with its union groups: Continental today announced it has reached tentative agreements on new
contracts covering the company’s pilots, flight attendants, mechanics and
dispatchers following negotiations with the Air Line Pilots Association
International, the International Association of Machinists and Aerospace
Workers, the International Brotherhood of Teamsters, and the Transport
Workers Union.

Each of the unions is preparing detailed communications to its membership
to explain the agreements, which are subject to union leadership approvals
and ratification by each covered work group. The tentative agreements
covering pilots and flight attendants are subject to internal union
approval processes before submission of the agreements for pilot and
flight attendant ratification. The company is not releasing details of the
agreements in order to allow the unions to directly communicate with their
members. Results of the ratification process for each of the agreements
are expected by the end of March 2005.

The company expects the wage and benefit reductions for all employees to
become effective at the end of March. Wage and benefit reductions for
airport, cargo, reservations, Chelsea food services, management and
clerical employees were scheduled to take effect today. However, these
reductions will be deferred until the end of March to coincide with other
work groups’ reductions.

The company’s officers and its board of directors will implement their
reductions on Feb. 28.

Ratification of the agreements will put Continental on a path for success,
with the ability to grow its network and the potential to achieve
consistent profitability.

ADVERTISEMENT

“I want to thank the unions’ leadership and negotiating teams for working
tirelessly through this process,” Chairman and Chief Executive Officer
Larry Kellner said. “I know a reduction in pay and benefits is painful.
However, these agreements, along with the reductions from the rest of our
work groups, will put in place the tools we need to be successful and grow
our company, securing the careers and retirement of all Continental
employees. We will all continue to work together to deliver a strong
future for Continental and its people.”

Because of Continental’s success in reaching these tentative agreements by
Feb. 28, The Boeing Company and Continental have agreed to extend for one
month the period for board approval of their previously announced aircraft
acquisition agreement, allowing time for ratification of these tentative
agreements. The aircraft acquisition agreement will permit the company to
grow by leasing eight 757-300 aircraft starting this summer, accelerating
delivery of six Boeing 737-800 aircraft into 2006, and acquiring 10 Boeing
787 aircraft beginning in 2009.

The tentative agreements, along with previously announced pay and benefit
reductions for other work groups, conclude the negotiation process with
all employees, except some Continental Micronesia (CMI) and international
employees. The pay and benefits of international employees must be
adjusted in accordance with laws and regulations of the various countries.
Continental expects to complete the process with these remaining employees
in the near future.

The company expects to achieve approximately $500 million of annual cost
savings on a run-rate basis when its agreements with its various work
groups are implemented. This excludes the non-cash cost of approximately
10 million stock options that the company expects to issue to its
employees in connection with the pay and benefit reductions and accruals
for certain non-cash costs or charges relating to items contained in the
tentative agreements. Further, the company’s ability to achieve certain of
the cost reductions will depend on timely and effective implementation of
new work rules, actual productivity improvement, implementation of
technology and other items, the timing and full impact of which are
difficult to estimate at this time.
——-