EXHIBIT 10.7(a)

COMPENSATION REDUCTION AGREEMENT

THIS COMPENSATION REDUCTION AGREEMENT

(this "Agreement") is entered into effective as of December 31__, 2004, by and
between Continental Airlines, Inc., a Delaware corporation ("Company"), and Mark
A. Erwin ("Executive").

W I T N E S S E T H:

WHEREAS,

Company and Executive have heretofore entered into that certain Employment
Agreement dated as of August 12, 2004; and

WHEREAS,

Company has heretofore granted to Executive various awards under Company's
Incentive Plan 2000, as amended (the "Incentive Plan 2000"), and the programs
maintained under the Incentive Plan 2000, including Company's Annual Executive
Bonus Program, as amended (the "Bonus Program"), and Company's Long Term
Incentive and RSU Program, as amended (the "LTIP/RSU Program")(the Incentive
Plan 2000, the Bonus Program, and the LTIP/RSU Program are collectively referred
to herein as the "Compensation Programs"); and

WHEREAS,

as part of Company's continuing efforts to reduce its costs of operation,
Company desires to reduce the compensation it provides to Executive, and
Executive is willing to accept such reduction, in an effort to enhance the
financial health of Company and to preserve employment opportunities for
Executive and others with Company.

NOW, THEREFORE,

in consideration of the premises set forth above, the mutual agreements set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and notwithstanding any provision
to the contrary in the Employment Agreement, the Compensation Programs or the
award notices issued to Executive under the Compensation Programs, Company and
Executive hereby agree as follows:

REDUCTION OF BASE SALARY

:
Subject to Executive's continuous employment by Company from the date of this
Agreement to February 28, 2005, commencing on February 28, 2005, and continuing
until such time, if any, as the parties may agree to a different amount,
Executive's annual base salary shall be reduced by 17.5% of the amount in effect
on the date hereof (i.e., from Executive's current base salary of $400,000 to a
reduced based salary of $330,000). Executive acknowledges that such reduction in
annual base salary will also result in a reduction in certain compensation and
other benefits provided by Company to Executive pursuant to the terms of
Company's benefit plans and programs, including, without limitation, under the
Bonus Program, the LTIP/RSU Program, and Executive's supplemental executive
retirement plan.

REDUCTION IN OUTSTANDING RSUs

:
Set forth on
Exhibit
A attached hereto is a list of the RSUs (as such term is defined in the LTIP/RSU
Program) that have been awarded to Executive by Company prior to the date of
this Agreement and in which Executive will not have a 100% vested and
nonforfeitable interest as of the close of business on February 28, 2005
(determined based on the terms of the LTIP/RSU Program and the applicable award
notices issued thereunder, and assuming Executive's continuous employment by
Company from the date of this Agreement until February 28, 2005). Subject to
Executive's continuous employment by Company from the date of this Agreement
through February 28, 2005, effective as of the close of business on February 28,
2005, Executive hereby surrenders and forfeits to Company 17.5% of the portion
of each award that is listed on Exhibit A in which Executive will not have a
100% vested and nonforfeitable interest as of the close of business on
February 28, 2005 (labeled on
Exhibit A
as "Nonvested"). The surrender and forfeiture of the applicable percentage of
the nonvested portion of each such award shall be applied separately as of each
vesting date under such award that will occur after February 28, 2005. If the
provisions of this paragraph would result in the surrender and forfeiture of a
fraction of an RSU, then, notwithstanding the preceding provisions of this
paragraph, such fractional RSU shall not be surrendered and forfeited.

EFFECT OF CERTAIN TERMINATIONS OF EMPLOYMENT

: Notwithstanding any other provision of this Agreement, if Executive's
employment by Company shall be terminated between Feb. 28, 2005 and Feb. 28,
2007 as a result of Executive's death or incapacity (as defined in Section
2.2(ii) of the Employment Agreement) or under circumstances requiring Company to
pay Executive the Termination Payment (as defined in the Employment Agreement as
of the date hereof), then all amounts (including such Termination Payment)
payable to Executive under the Employment Agreement or the Compensation Programs
(other than under the Continental Retirement Plan) shall be calculated and made
as if this Agreement were never in force, and all awards forfeited by Executive
pursuant to Section 2 hereof shall be restored to Executive nunc pro tunc (or,
if Company is unable to so restore such awards due to restrictions imposed by
the Compensation Programs or applicable law, the then-fair market value thereof
shall be paid in cash to Executive or Executive's estate).

NOTICES

:
For purposes of this Agreement,

notices, demands and all other communications provided for in this Agreement
shall be given in the same manner as indicated in the Employment Agreement.

ASSIGNMENT

:
This Agreement shall be binding upon and inure to the benefit of Company and any
successor of Company, by merger or otherwise. Except as provided in the
preceding sentence, this Agreement, and the rights and obligations of the
parties hereunder, are personal and neither this Agreement, nor any right,
benefit, or obligation of either party hereto, shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party.

AMENDMENT

:
This Agreement may not be modified except by an agreement in writing executed by
both Company and Executive.

GOVERNING LAWS

:
This Agreement shall be subject to and governed by the laws of the State of
Texas, without giving effect to principles of conflicts of law.

VALIDITY

:
In the event that any portion or provision of this Agreement is found to be
invalid or unenforceable, the other portions or provisions hereof shall not be
affected thereby.

COUNTERPARTS

:
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which together shall constitute one and
the same instrument.

EFFECT OF AGREEMENT

:
Except as provided in any signed written agreement contemporaneously or
hereafter executed by Company and Executive, this Agreement constitutes the
entire agreement of the parties with regard to the subject matter hereof.
Without limiting the scope of the preceding sentence, all understandings and
agreements preceding the date of execution of this Agreement and relating to the
subject matter hereof are hereby null and void and of no further force and
effect. This Agreement constitutes an amendment to the Employment Agreement and,
to the extent applicable, the award notices that have been issued to Executive
prior to the date hereof pursuant to the Compensation Programs. Neither this
Agreement nor any action taken by Company in accordance with the terms of this
Agreement shall give Executive any right to terminate Executive's employment
under the Employment Agreement under circumstances that would give rise to the
payment of a Termination Payment (or the payment or provision of related
severance amounts and benefits) under the Employment Agreement. Further, nothing
in this Agreement shall confer to Executive any right of future employment with
Company or any of its affiliates.

[Signatures begin on next page.]

IN WITNESS WHEREOF,

the parties have executed this Agreement as of the date first above written.

"COMPANY"

CONTINENTAL AIRLINES, INC

 

By:

/s/ Michael H. Campbell

Name:

Michael H. Campbell

Title:

Senior Vice President -

Human Resources and

Labor Relations

"EXECUTIVE"

 

 

/s/ Mark A. Erwin

____________

Mark A. Erwin

 

 

EXHIBIT A

TO

COMPENSATION REDUCTION AGREEMENT

 

 

RSUs

Performance Period Relating to the Award

Total Number of RSUs subject to Award (all Nonvested)

RSUs to be Surrendered and Forfeited as of February 28, 2005

April 1, 2004 to June 30, 2005

40,000

7,000

April 1, 2004 to March 31, 2006

40,000

7,000

April 1, 2004 to December 31, 2007

50,000

8,750