Continental Airlines plans to cancel flights rather than risk stiff fines under new federal rules designed to punish carriers for delaying passengers.

CEO Jeff Smisek says that the airline will cancel flights that might be delayed three hours.

Under a federal rule taking effect next month, airlines can be fined up to $27,500 per passenger if planes are delayed three hours and passengers can't get off.

Smisek says long delays are rare, and mostly caused by an outdated air traffic control system that the government has failed to upgrade.