Continental Airlines Inc., the fifth-largest U.S. carrier, said it will skip contributions to employee pension plans this year, taking advantage of a law enacted in April to conserve cash.
The move will help the company keep $1.5 billion in unrestricted cash in "these difficult and turbulent times," Houston-based Continental said in a written statement. The carrier said in a July filing that it planned to put $250 million in the plans and faced a minimum funding requirement of $17 million.
The U.S. law gave airlines, steelmakers and other companies the option to defer about $80 billion in pension funding in the next two years. Continental spokesman Rahsaan Johnson declined to comment on what the airline will do next year. The company's plans cover almost all of its 41,000 workers, he said.
"We kind of understand the economics of the situation," said Jim Moody, a spokesman for the Continental Air Line Pilots Association. "We wish the economics were better, but that's the airline industry."
On Thursday, Continental said it will eliminate 425 jobs, mostly managers and clerical workers, to help reduce annual costs by $200 million. The airline posted a net loss of $141 million in this year's first half as jet-fuel prices rose and increased competition from discount carriers held down fares.
Continental is trying to trim expenses by $1.1 billion, after almost completing implementation of earlier measures to cut $900 million.
Moody, the pilots union spokesman, said Continental told the union it was going to skip the pension contributions. The carrier and the pilots are talking about the possibility of changing the airline's pension plan, which now pays retirees a set amount of benefits, to one that funds individual retirement accounts.
The pilots union said such a program would be cheaper for the company and would give workers more control of their retirement savings.