Continental to Ground 11 Planes

Tuesday, August 20th 2002, 12:00 am

By: News On 6

HOUSTON (AP) _ Continental Airlines announced Tuesday that it is cutting capacity, grounding airplanes and charging for certain services to low-fare customers in order to combat an industry downturn that remains nearly a year after the Sept. 11 attacks.

The Houston-based airline, the nation's fifth largest, said it will provide 17 percent fewer seats and ground 11 airplanes in its fleet to save $350 million on an annual basis and $80 million for the rest of 2002.

The move comes after its larger rivals have cut jobs, capacity or both in response to fewer people flying than before Sept. 11.

Three U.S. carriers _ US Airways, Midway Airlines and Vanguard Airlines _ have filed for bankruptcy since the attacks siphoned passengers from the airline business.

American Airlines, the nation's No. 1 carrier, announced last week that it would cut 7,000 jobs and reduce capacity 9 percent by November. No. 2 carrier United and Northwest Airlines have said they will cut capacity 9 percent and 13 percent, respectively, for winter.

Continental said its cutbacks were necessary to combat continued deterioration of revenue and the increased cost of fuel, insurance and security.

The company announced no layoffs, saying it would monitor employee levels and ``hopes to avoid additional furloughs'' through a hiring freeze, retirements, voluntary leaves and attrition.

``US Airways declared bankruptcy and United is likely to soon follow,'' said Gordon Bethune, chairman and chief executive of Continental. ``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.''

Bethune said more changes would come ``unless market conditions improve quickly.''

Continental also said it would continue providing full services to full-fare customers while charging low-fare travelers for certain services.

Those changes include:

_A $20 fee for all domestic paper tickets.

_Elimination of discounts on some low-fare categories.

_A new policy against ``waivers and favors.''

_Re-bidding of some supplier contracts.

_Adherence to policies regarding assessment of fees for changing tickets and collection of excess baggage.

``The market is driving us to make these changes,'' said Jeff Misner, Continental's senior vice president and chief financial officer.