NEW YORK (CNNfn) - Continental Airlines announced Saturday that it is cutting its schedule of flights by 20 percent and laying off 12,000 employees due to the reluctance of both business and leisure travelers to return to the skies after Tuesday's terrorist attack on the United States.|
The company said in the last four days Continental (CAL: Research, Estimates) has seen a drastic drop in bookings in an already declining economy. It said many corporations have instructed their employees to avoid U.S. airlines.
The layoff, the first announced by a major carrier, represents more than 21 percent of Continental's staff.
Continental, the nation's No. 5 airline, is one of only two major airlines that reported a profit during the first two quarters of the year, and was one of only two expected to finish the year in the black before Tuesday's attack, in which hijackers crashed four U.S. passenger jets, destroying the World Trade Center in New York and severely damaging the Pentagon in Virginia.
Continental's CEO Gordon Bethune said Saturday that immediate federal assistance is needed if the nation's air† transportation system is to survive. Congressional sources told CNN Friday that Democrats and Republicans have agreed on $2.5 billion in assistance for the industry as part of the recently passed federal relief.
The slowing of the U.S. economy had led to a drastic decline in business travel, the key to airline profitability, even before the terrorist attack. The industry as a whole had been on pace to report more than $3 billion in losses this year, according to analysts' forecasts before Tuesday's events.
While Continental has remained profitable, it is seeing lower profits than the year earlier period. The company did not give any new earnings guidance for the third or fourth quarter in its release Saturday.
The industry has basically been free of layoffs despite mounting losses through this period, as the airlines attempted to keep as many planes as possible operating, even if they were seeing lower fares and booking rates.
"While we regret the necessity for this massive furlough and schedule reduction, we have no choice," said a statement from Bethune.
But Continental is not likely to be the last carrier to announce such staff cuts. American Airlines, a unit of AMR Corp. (AMR: Research, Estimates), the world's largest airline company, said Friday it also expected to operate only 80 percent of its normal schedule for the foreseeable future, although a spokesman there said Friday that it was too soon to speak of layoffs. Northwest Airlines (NWAC: Research, Estimates) also announced a 20 percent cut in its schedule Saturday, and said it would look at its staffing needs in light of the cut back this week.