The carrier is to cut flights, withdraw aircraft and change some of its fares as it seeks to cut losses.

The airline recorded a loss of $139m for the April to June quarter.

Continental said the new measures would lead to pre-tax gains of $80m for the rest of the year, and $350m annually when fully implemented.

"These are challenging times in our industry and we need to do something now," said Continental's chairman and chief executive Gordon Bethune.

The US airline industry is still struggling to emerge from the post-11 September slump.

Last week American Airlines cut 7,000 jobs and introduced changes to reduce capacity.

On 11 August US Airways filed for bankruptcy protection, and United Airlines has said it may also have to do so unless it can cut costs.