Continental Airlines: Responding to Market Changes

HOUSTON, Aug. 20 /PRNewswire-FirstCall/—Continental Airlines
(NYSE: CAL) announced today that it is implementing a series of revenue-
generating and cost-saving initiatives that are designed to achieve pre-tax
contributions in excess of $350 million on an annual basis when fully
implemented and $80 million for the balance of 2002.  These initiatives are a
necessary response to the dramatic changes in the marketplace, including
continued deterioration of revenue and rising fuel, insurance and security

These changes will maintain Continental`s industry-leading product and
corporate culture, while raising new revenue and reducing costs.

The company will remove an additional 11 MD-80 aircraft from the schedule
by the end of 2003, having already grounded 49 aircraft since September 2001.

Continental is implementing domestic capacity reductions that are among
the largest in the industry.  Domestic mainline jet capacity in August 2003,
the peak month for domestic flying, will be approximately 17 percent below
domestic capacity in August 2001.

For all of 2003, domestic mainline jet capacity will be reduced
approximately 4 percent year over year.  This decrease is in addition to the
6.5 percent already reduced in 2002 compared with 2001.


The company will continue to monitor employment levels and hopes to avoid
additional furloughs through a hiring freeze, retirements, voluntary leaves
and attrition.

“These are challenging times in our industry and we need to do something
now,” said Continental Chairman and Chief Executive Officer Gordon Bethune.
“US Airways declared bankruptcy and United is likely to soon follow.  American
is eliminating 7,000 jobs.  While we remain committed to running a clean, safe
and reliable operation, we need to do some aggressive belt tightening so we
don`t end up like them.  We`re taking action both internally and externally
and all the steps we`re taking today are necessary.  Unless market conditions
improve quickly, we`ll be forced to make further changes in every aspect of
our operation.”

Continental continues to focus on providing products and services its
customers value and are willing to pay for.  In the current environment of
declining air fares, Continental will retain its full-service product for
higher-revenue customers, while adjusting services and fees to reflect
customer demand for lower fares.  These changes enable customers to select the
products and services they value and are willing to pay for.  These service
and fee changes will be announced and implemented over the next several weeks.

Included among the more than 100 initial changes Continental is
implementing are:

—Immediate assessment of a $20 fee for all domestic paper tickets from all points of sale;—Both new and additional fees for services that low-fare customers elect;—Elimination of discounts on certain published and unpublished low-fare categories;—Rigid enforcement of all fare rules and a new, strict policy against “waivers and favors”;—Re-bidding of many supplier contracts;—A disciplined adherence to policies on the collection of excess baggage charges, change fees and other items;—A further reduction of distribution costs through advanced technologies; and—Modification of select employee programs.

“The market is driving us to make these changes,” said Continental Senior
Vice President and Chief Financial Officer Jeff Misner.  “We will continue to
closely review every aspect of our operations and product to ensure that we
meet current market demand.  The initiatives announced today will not be
sufficient to return the company to profitability in the existing

Other cost-reducing actions Continental has taken in recent years include:—Reduction of aircraft types from nine to four;—Transition to the industry`s newest and most fuel-efficient fleet;—Establishment in 1996 of the efficient “rolling hub” concept at the airline`s New York/Newark hub;—Elimination of most travel agency base commissions; and—Installation of the world`s largest eTicket check-in network, with more than 640 eService Center kiosks in more than 100 cities.

This press release contains forward-looking statements that are not
limited to historical facts, but reflect the Company`s current beliefs,
expectations or intentions regarding future events.  All forward-looking
statements involve risks and uncertainties that could cause actual results to
differ from those in the forward-looking statements.  For examples of such
risks and uncertainties, please see the risk factors set forth in the
Company`s 2001 10-K and its other securities filings, which identify important
matters such as terrorist attacks, domestic and international economic
conditions, the significant cost of aircraft fuel, labor costs, competition
and industry conditions including the demand for air travel, airline pricing
environment and industry capacity decisions, regulatory matters and the
seasonal nature of the airline business.  In addition to the foregoing risks,
there can be no assurance that the Company will be able to achieve the pre-tax
contributions from the revenue-generating and cost-reducing initiatives
discussed in this press release, which will depend, among other matters, on
customer acceptance and competitor actions.