Continental Airlines Inc., the No. 5 U.S. carrier, on Wednesday announced $500 million of cost cuts, including 1,200 jobs by the end of the year, and said a U.S.-Iraq war or soft demand might lead to further cost-cutting.

Continental said it would cut about 125 pilots, 500 reservation agents, 350 airport agents and 225 other employees by the end of the year.

The Houston-based carrier also said it plans to renegotiate contracts with key suppliers, try to reduce landing and airport fees, eliminate paper tickets worldwide by June 2004 and close ticket offices in selected cities.

"It's a positive step in that (Continental) is looking from top to bottom at their costs and seeing what they can reasonably do without in the short run," said George Hamlin, an aviation consultant at Global Aviation Associates Ltd. in Washington, D.C. "I would not be at all surprised to see this trend spread elsewhere."

Continental, which has 4,300 employees on temporary layoff or leave of absence, said it would eliminate as many of the additional 1,200 jobs as possible through voluntary exits, leaves of absence and attrition. It said it is not asking for pay cuts right now.

"We need $500 million in annual cost savings and revenue generation to permit us to be a survivor during the worst financial crisis in aviation history," Chief Executive Gordon Bethune said in a statement. "If the anticipated war in Iraq is prolonged, or if other events further degrade revenue or increase costs, we will need to find additional savings or ways to generate more revenue."

Big U.S. airlines have lost nearly $20 billion since the end of 2000. The Air Transport Association, which represents them, said U.S. airlines could slash 70,000 more jobs and annual losses could reach $10.7 billion if there is a war with Iraq.

Airlines are pressing the federal government for more financial aid, which analysts have said would probably take the form of rollbacks in taxes and security fees.

Two major U.S. carriers, UAL Corp.'s United Airlines Inc. and U.S. Airways Group Inc., are already in bankruptcy protection. Some analysts have said AMR Corp.'s American Airlines Inc. might follow later this year.