Continental Airlines, the nation's fifth largest carrier, said on Saturday it will reduce its long-term flight schedule by about 20 percent and will be forced to lay off about 12,000 employees after the hijacking attacks on the United States. 

Continental cited a drastic decline in demand for air travel caused by Tuesday's terror attacks and the operational and financial costs of dramatically increased security requirements. 

``The U.S. airline industry is in an unprecedented financial crisis,'' said Gordon Bethune, Continental chairman and chief executive officer. 

Hijackers commandeered aircraft and crashed them into New York's landmark World Trade Center twin towers, which collapsed. Another flight was rammed into the Pentagon and a fourth plane crashed in Pennsylvania, apparently missing its target. Hundreds were killed and thousands remain missing. 

The U.S. Federal Aviation Administration grounded all commercial air traffic on Tuesday for the first time. 

On Thursday, the U.S. Department of Transportation ordered the U.S. national airspace reopened to commercial and private aviation -- but flights resumed slowly as airports and airlines implemented security measures. 

Before the attacks, Continental and its subsidiaries flew more than 2,500 flights a day. The airline currently employs more than 56,000 people. 

In the last four days, Continental said it has seen a drastic drop in bookings in an already declining economy. In addition, many corporations have instructed their employees to avoid U.S airlines, the Houston, Texas-based carrier said. 

Bethune called on the president and members of Congress to take immediate action to restore the stability of the industry. ``Our industry needs immediate Congressional action if the nation's air transportation system is to survive,'' he said in a news release. 

Continental said it expects to announce the details of its schedule reduction and furloughs within the week. 

``While we regret the necessity for this massive furlough and substantial schedule reduction, and the adverse impact on our dedicated employees, customers and communities we serve,'' Bethune said, ``we have no choice.'' 

Global loss estimates for the industry are reaching the double-digit billions of dollars. House Democratic leader Richard Gephardt said he expected there would be legislation to help U.S. airlines struggling with liquidity problems. 

Adam Pilarski, senior vice president at aviation consulting firm Avitas, on Friday said peoples' fear of flying would be a big short-term problem. 

``If nothing bad happens, it will take one to two years to get back to where we were,'' Pilarski said. ``Probably traffic will drop at least 50 percent in the coming quarter, which of course is a disaster. Without a doubt there will be some consolidation.''