Global recession contributes to weak revenue environment; company
to implement revenue and cost initiatives designed to achieve
approximately $100 million in annual benefits HOUSTON, July 21
/PRNewswire-FirstCall/ -- Continental Airlines (NYSE: CAL) today
reported a second quarter 2009 net loss of $213 million ($1.72
diluted loss per share). Excluding $44 million of previously
announced special charges, Continental recorded a net loss of $169
million ($1.36 diluted loss per share). Second quarter results were
adversely affected by significant declines in high yield traffic as
many business travelers curtailed travel or purchased lower yield
economy tickets due to the weakened economy. In addition, the H1N1
virus reduced second quarter consolidated passenger revenue by an
estimated $50 million. Fuel expense declined $762 million (46.1
percent) in the second quarter 2009 compared to the second quarter
2008, while revenue declined $918 million compared to the same
period. In response to the significant decline in revenue,
Continental is implementing a number of measures to raise revenues
and reduce costs that are designed to achieve approximately $100
million in annual benefits when fully implemented in 2010
including: -- Eliminating approximately 1,700 positions across the
company, including management and clerical positions. This is in
addition to the previously announced elimination of 500 reservation
agent positions and special company offered leaves of absence
extended for 700 flight attendants. Continental is offering
employees voluntary programs to minimize the number of involuntary
furloughs and reductions in force. -- Increasing domestic checked
baggage fees by $5 for customers who do not prepay those fees
online. This change is effective immediately for travel Aug. 19,
2009, and beyond. -- Increasing the telephone reservation booking
service fee by $5 effective immediately. -- Other revenue
initiatives to be announced when implemented "My co-workers are
doing a great job of working together to focus on customer service
despite significant challenges currently facing our industry," said
Larry Kellner, chairman and chief executive officer. "While the
unit revenue decline appears to be bottoming out, it is doing so at
low levels and we must take aggressive steps to increase revenue
and reduce costs. The most difficult changes will be the employee
reductions that we are forced to make throughout the company."
Second Quarter Revenue and Capacity Total revenue for the quarter
was $3.1 billion, a decrease of 22.7 percent compared to the same
period in 2008. Passenger revenue for the quarter fell 24.2 percent
($883 million) compared to the same period last year due to lower
fares and passenger traffic declines. Consolidated revenue
passenger miles (RPMs) for the second quarter decreased 6.4 percent
year-over-year on a capacity decrease of 7.8 percent, resulting in
a second quarter consolidated load factor of 82.7 percent, 1.3
points higher than the second quarter of 2008. Consolidated yield
for the second quarter decreased 19.1 percent year-over-year.
Consolidated passenger revenue per available seat mile (RASM) for
the second quarter decreased 17.7 percent year-over-year. Mainline
RPMs in the second quarter of 2009 decreased 5.7 percent compared
to the second quarter of 2008, on a capacity decrease of 7.3
percent year-over-year. Mainline load factor was 83.2 percent, up
1.5 points year-over-year for the second quarter. Continental's
mainline yield decreased 18.3 percent in the second quarter over
the same period in 2008. As a result, second quarter 2009 mainline
RASM was down 16.9 percent compared to the second quarter of 2008.
Passenger revenue for the second quarter of 2009 and
period-to-period comparisons of related statistics by geographic
region for the company's mainline operations and regional
operations are as follows: Percentage Increase (Decrease) in Second
Quarter 2009 vs. Second Quarter 2008 Passenger
------------------------------------------- Revenue Passenger (in
millions) Revenue ASMs RASM Yield ------- ---- ---- ----- ------
Domestic $1,167 (22.4)% (9.5)% (14.3)% (15.9)% Trans-Atlantic 577
(28.3)% (10.6)% (19.8)% (23.8)% Latin America 345 (20.8)% (5.2)%
(16.5)% (16.4)% Pacific 211 (12.3)% 12.8 % (22.3)% (18.9)% Total
Mainline $2,300 (22.9)% (7.3)% (16.9)% (18.3)% Regional $467
(29.9)% (11.8)% (20.5)% (20.1)% Consolidated $2,767 (24.2)% (7.8)%
(17.7)% (19.1)% Cargo revenue in the second quarter of 2009
decreased 37.9 percent ($50 million) compared to the same period in
2008, due to reduced freight volume and lower pricing. Second
Quarter Operations and Notable Accomplishments During the quarter,
employees earned $9 million in cash incentives for running the best
on- time operation among the major network carriers in May and June
as reported by the U.S. Department of Transportation (DOT).
Continental recorded an on-time arrival rate of 78.7 percent and a
systemwide mainline segment completion factor of 99.6 percent
during the quarter. "My co-workers have done an impressive job
running a good operation and delivering great service despite very
high load factors, which put additional stress on the system," said
Jeff Smisek, president and chief operating officer. "We will get
through this global recession by working together and continuing to
outperform our competitors." The DOT approved the application for
Continental to join the existing antitrust immunized alliance
including United Airlines and eight other Star Alliance member
carriers, ensuring effective global competition with other
antitrust immunized alliances while encouraging the retention and
growth of open skies between the U.S. and other nations.
Continental remains focused on providing a seamless transition for
its customers from the SkyTeam alliance to Star Alliance this fall.
During the quarter, Continental contributed $50 million to its
defined benefit pension plans. Continental continued to install
DIRECTV on its aircraft during the quarter, with the new service
now offered on 16 aircraft. DIRECTV gives customers the choice of
77 channels of live television programming -- more channels than
any other carrier -- including live sports, news, weather and
children's shows. The company expects to complete installation on
its fleet of Boeing 737 Next-Generation and Boeing 757-300 aircraft
by the first quarter of 2011. Second Quarter Costs Due to
significantly lower jet fuel costs, Continental's mainline cost per
available seat mile (CASM) decreased 12.9 percent (13.2 percent
excluding special charges) in the second quarter compared to the
same period last year. The mainline price of a gallon of fuel
dropped 39.7 percent year-over-year and mainline fuel consumption
fell by 9.4 percent. Holding fuel rate constant and excluding
special items, second quarter 2009 mainline CASM increased 2.8
percent compared to the second quarter of 2008. "Once again, the
entire Continental team did an outstanding job controlling costs
and running an efficient operation in a challenging economic
environment," said Zane Rowe, Continental's executive vice
president and chief financial officer. Fuel costs for the quarter
were $762 million lower compared to the same period last year as a
result of a decrease in fuel prices and lower volumes. Consolidated
fuel price was $2.07 per gallon in the second quarter of 2009, of
which $0.49 per gallon was related to fuel hedge losses.
Consolidated fuel price was $3.46 per gallon in the second quarter
2008, which included $0.17 per gallon in fuel hedge gains. During
the quarter, mainline fuel consumption decreased 9.4 percent
compared to the same period last year, while mainline RPMs
decreased only 5.7 percent compared to the same period. Fleet
Changes Continue to Improve Efficiency Continental continued to
improve fuel efficiency during the quarter by adding modern,
fuel-efficient aircraft, equipped with winglets. During the
quarter, Continental took delivery of two new Boeing 737-900ERs,
one of which was painted with a retro livery to commemorate the
airline's 75th anniversary. In addition, the company removed from
service four Boeing 737-500s. Continental is expected to take
delivery of seven Boeing 737 aircraft in the second half of 2009.
The company expects to remove 29 additional Boeing 737-300 and
737-500 aircraft from service by January 2010. Cash and Liquidity
Continental ended the second quarter with $2.77 billion in
unrestricted cash, cash equivalents and short-term investments. On
July 1, 2009, Continental completed the sale of $390 million of
Pass Through Certificates, the first offering of its kind to close
since the credit markets froze last year. A portion of the proceeds
from the sale of the certificates will be used to finance the
company's purchase of five new Boeing 737-900ERs expected to be
delivered by the end of 2009. The remainder of the proceeds will be
used for general corporate purposes. The Pass Through Certificates
will be secured by a total of 17 of the company's aircraft. In
addition, Continental completed an agreement with a commercial bank
to provide financing for two Boeing 737-900ER aircraft scheduled
for delivery in July of 2009, one of which has already been
delivered. The company has now completed financing arrangements for
all of its new aircraft deliveries this year and has backstop
financing available for all of its new aircraft deliveries in 2010.
Corporate Background Continental Airlines is the world\'s fifth
largest airline. Continental, together with Continental Express and
Continental Connection, has more than 2,750 daily departures
throughout the Americas, Europe and Asia, serving 133 domestic and
132 international destinations. Another 750 additional points are
served via current alliance partners. With more than 43,000
employees, Continental has hubs serving New York, Houston,
Cleveland and Guam, and together with its regional partners,
carries approximately 63 million passengers per year. For more
company information, go to continental.com. Continental Airlines
will conduct a regular quarterly telephone briefing today to
discuss these results and the company's financial and operating
outlook with the financial community and news media at 9:30 a.m.
CT/10:30 a.m. ET. To listen to a live broadcast of this briefing,
go to continental.com/About Continental/Investor Relations. This
press release contains forward-looking statements that are not
limited to historical facts, but reflect the company's current
beliefs, expectations or intentions regarding future events. All
forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from those in the
forward-looking statements. For examples of such risks and
uncertainties, please see the risk factors set forth in the
company's 2008 Form 10-K and its other securities filings,
including any amendments thereto, which identify important matters
such as the significant volatility in the cost of aircraft fuel,
the company's transition to a new global alliance, the consequences
of its high leverage and other significant capital commitments, its
high labor and pension costs, delays in scheduled aircraft
deliveries, service interruptions at one of its hub airports,
disruptions to the operations of its regional operators,
disruptions in its computer systems, and industry conditions,
including the recession in the U.S. and global economies, the
airline pricing environment, terrorist attacks, regulatory matters,
excessive taxation, industry consolidation, the availability and
cost of insurance, public health threats and the seasonal nature of
the airline business. The company undertakes no obligation to
publicly update or revise any forward-looking statements to reflect
events or circumstances that may arise after the date of this press
release, except as required by applicable law. -tables attached-
CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES STATEMENTS OF
OPERATIONS (In millions, except per share data) (Unaudited) Three
Months % Six Months % Ended June 30, Increase/ Ended June 30,
Increase/ 2009 2008 (Decrease) 2009 2008 (Decrease) ---- ---- ----
---- (Adjusted) (Adjusted) Operating Revenue: Passenger (excluding
fees and taxes of $379, $408, $725 and $784) $2,767 $3,650 (24.2)%
$5,384 $6,873 (21.7)% Cargo 82 132 (37.9)% 167 254 (34.3)% Other
277 262 5.7 % 536 487 10.1 % --- --- --- --- 3,126 4,044 (22.7)%
6,087 7,614 (20.1)% ----- ----- ----- ----- Operating Expenses:
Aircraft fuel and related taxes (A) 891 1,653 (46.1)% 1,626 2,915
(44.2)% Wages, salaries and related costs 799 704 13.5 % 1,564
1,432 9.2 % Aircraft rentals 235 246 (4.5)% 472 493 (4.3)% Regional
capacity purchase, net (A) 217 299 (27.4)% 431 591 (27.1)% Landing
fees and other rentals 216 210 2.9 % 425 418 1.7 % Maintenance,
materials and repairs 161 167 (3.6)% 314 326 (3.7)% Distribution
costs 150 194 (22.7)% 307 375 (18.1)% Depreciation and amortization
118 108 9.3 % 229 215 6.5 % Passenger services 96 107 (10.3)% 183
203 (9.9)% Special charges (B) 44 58 NM 48 50 NM Other 353 369
(4.3)% 696 733 (5.0)% --- --- --- --- 3,280 4,115 (20.3)% 6,295
7,751 (18.8)% ----- ----- ----- ----- Operating Loss (154) (71) NM
(208) (137) 51.8 % ----- ---- ----- ----- Nonoperating Income
(Expense): Interest expense (C) (90) (91) (1.1)% (183) (185) (1.1)%
Interest capitalized 8 8 - 17 17 - Interest income 4 16 (75.0)% 8
40 (80.0)% Gain on sale of investments - 78 (100.0)% - 78 (100.0)%
Other, net 19 11 72.7 % 17 10 70.0 % -- -- -- -- (59) 22 NM (141)
(40) NM ---- -- ----- ---- Loss before Income Taxes (213) (49) NM
(349) (177) 97.2 % Income Tax Benefit (C) - 44 (100.0)% - 90
(100.0)% --- --- --- --- Net Loss $(213) $(5) NM $(349) $(87) NM
===== ==== ===== ===== Basic and Diluted Loss per Share $(1.72)
$(0.05) NM $(2.82) $(0.87) NM ======= ======= ======= =======
Shares Used for Basic and Diluted Computation 124 99 25.3 % 124 99
25.3 % (A) Expense related to fuel and related taxes on flights
operated for us by other operators under capacity purchase
agreements is now included in aircraft fuel and related taxes,
whereas it was previously reported in regional capacity purchase,
net. Reclassifications have been made in these financial statements
to conform to our current presentation. These reclassifications do
not affect operating loss or net loss for any period. (B) Operating
Expenses: Special Charges. Special charges includes the following:
Three Months Year Ended Ended June 30, June 30, 2009 2008 2009 2008
---- ---- ---- ---- Aircraft-related charges, net of gains on sales
of aircraft $43 $41 $47 $33 Other 1 17 1 17 -- -- -- -- Total
special charges $44 $58 $48 $50 === === === === 2009.
Aircraft-related charges in the second quarter of 2009 include $31
million of non-cash impairments on owned Boeing 737-300 and 737-
500 aircraft and related assets, an $8 million non-cash charge
related to the disposition of three Boeing 737-300 aircraft and a
$4 million non-cash charge to write off certain obsolete spare
parts. In the first quarter of 2009, the company recorded $4
million charge for future lease costs and other related costs on a
permanently grounded Boeing 737-300 aircraft. 2008.
Aircraft-related charges in the second quarter of 2008 include $37
million of non-cash impairments on owned Boeing 737-300 and 737-
500 aircraft and related assets, a non-cash charge of $14 million
to write down spare parts and supplies for the Boeing 737-300 and
737-500 fleets to the lower of cost or net realizable value and $10
million of gains on the sale of two owned Boeing 737-500 aircraft.
Other special charges in the second quarter of 2008 include $17
million of charges related to contract settlements with regional
carriers and unused facilities. During the first quarter of 2008,
the company sold three owned Boeing 737-500 aircraft, resulting in
net gains of $8 million. (C) Effective January 1, 2009, we adopted
the Financial Accounting Standards Board's Staff Position No. APB
14-1, "Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement)," which clarifies the accounting for convertible debt
instruments that may be settled in cash (including partial cash
settlement) upon conversion. The financial statements for the three
and six months ended June 30, 2008 have been adjusted to reflect
our adoption of this standard. CONTINENTAL AIRLINES, INC. AND
SUBSIDIARIES STATISTICS Three Months % Six Months % Ended June 30,
Increase/ Ended June 30, Increase/ 2009 2008 (Decrease) 2009 2008
(Decrease) ---- ---- ---------- ---- ---- ---------- Mainline
Operations: Passengers (thousands) 11,876 13,000 (8.6)% 22,438
25,196 (10.9)% Revenue passenger miles (millions) 20,772 22,017
(5.7)% 38,462 41,940 (8.3)% Available seat miles (millions) 24,963
26,933 (7.3)% 48,316 52,211 (7.5)% Cargo ton miles (millions) 219
263 (16.7)% 420 524 (19.8)% Passenger load factor: Mainline 83.2%
81.7% 1.5 pts. 79.6% 80.3% (0.7) pts. Domestic 86.4% 84.7% 1.7 pts.
83.2% 83.4% (0.2) pts. International 80.2% 78.8% 1.4 pts. 76.2%
77.3% (1.1) pts. Passenger revenue per available seat mile (cents)
9.21 11.08 (16.9)% 9.31 10.85 (14.2)% Total revenue per available
seat mile (cents) 10.59 12.49 (15.2)% 10.71 12.22 (12.4)% Average
yield per revenue passenger mile (cents) 11.07 13.55 (18.3)% 11.69
13.50 (13.4)% Average fare per revenue passenger $195.82 $231.94
(15.6)% $202.48 $227.07 (10.8)% Cost per available seat mile (CASM)
(cents) (A) 10.85 12.45 (12.9)% 10.71 12.13 (11.7)% Special charges
per available seat mile (cents) 0.18 0.16 NM 0.10 0.06 NM CASM,
holding fuel rate constant (cents) (A) 12.82 12.45 3.0% 12.40 12.13
2.2% Average price per gallon of fuel, including fuel taxes $2.08
$3.45 (39.7)% $1.96 $3.13 (37.4)% Fuel gallons consumed (millions)
358 395 (9.4)% 692 769 (10.0)% Actual aircraft in fleet at end of
period (B) 351 375 (6.4)% 351 375 (6.4)% Average length of aircraft
flight (miles) 1,551 1,497 3.6 % 1,527 1,477 3.4 % Average daily
utilization of each aircraft (hours) 10:46 11:34 (7.0)% 10:34 11:23
(7.1)% Regional Operations: Passengers (thousands) 4,472 4,962
(9.9)% 8,318 9,205 (9.6)% Revenue passenger miles (millions) 2,394
2,729 (12.3)% 4,494 5,085 (11.6)% Available seat miles (millions)
3,044 3,450 (11.8)% 6,015 6,548 (8.1)% Passenger load 78.7% 79.1%
(0.4) pts. 74.7% 77.7% (3.0) pts. factor Passenger revenue per
available seat mile (cents) 15.35 19.31 (20.5)% 14.74 18.47 (20.2)%
Average yield per revenue passenger mile (cents) 19.51 24.41
(20.1)% 19.72 23.78 (17.1)% Actual aircraft in fleet at end of
period (C) 266 278 (4.3)% 266 278 (4.3)% Consolidated Operations
(Mainline and Regional): Passengers (thousands) 16,348 17,962
(9.0)% 30,756 34,401 (10.6)% Revenue passenger miles (millions)
23,166 24,746 (6.4)% 42,956 47,025 (8.7)% Available seat miles
(millions) 28,007 30,383 (7.8)% 54,331 58,759 (7.5)% Passenger load
factor 82.7% 81.4% 1.3 pts. 79.1% 80.0% (0.9) pts. Passenger
revenue per available seat mile (cents) 9.88 12.01 (17.7)% 9.91
11.70 (15.3)% Average yield per revenue passenger mile (cents)
11.94 14.75 (19.1)% 12.53 14.62 (14.3)% Average price per gallon of
fuel, including fuel taxes $2.07 $3.46 (40.2)% $1.95 $3.14 (37.9)%
Fuel gallons consumed (millions) 430 478 (10.0)% 833 929 (10.3)%
(A) Includes impact of special charges. (B) Excludes nine grounded
Boeing 737-300 aircraft, nine grounded Boeing 737-500 aircraft and
one Boeing 737-900ER aircraft delivered but not yet placed into
service at June 30, 2009. (C) Consists of aircraft operated under
capacity purchase agreements with Continental's regional carriers
ExpressJet, Colgan, Chautauqua and CommutAir. Excludes 30 EMB-135
aircraft temporarily grounded at June 30, 2009. CONTINENTAL
AIRLINES, INC. AND SUBSIDIARIES NON-GAAP FINANCIAL MEASURES Three
Months Net Loss (in millions) Ended June 30, 2009
------------------- Net loss $(213) Adjust for special charges (net
of tax of $0) 44 --- Net loss, excluding special items (A) $(169)
====== Three Months Ended June 30, 2009 Loss per Share
------------------- Diluted Loss per share $(1.72) Adjust for
special charges 0.36 ---- Diluted loss per share, excluding special
items (A) $(1.36) ======= CASM Mainline Operations (cents) Three
Months % Six Months % Ended June 30, Increase/ Ended June 30,
Increase/ 2009 2008 (Decrease) 2009 2008 (Decrease) Cost per
available seat mile (CASM) $10.85 $12.45 (12.9)% $10.71 $12.13
(11.7)% Less: Special charges per available seat mile (0.18) (0.16)
NM (0.10) (0.06) NM ------ ------ ------ ------ CASM, excluding
special charges 10.67 12.29 (13.2)% 10.61 12.07 (12.1)% Less:
Current year fuel cost per available seat mile (B) (2.98) - NM
(2.80) - NM Add: Current year fuel cost at prior year fuel price
per available seat mile (B) 4.95 - NM 4.49 - NM ---- --- ---- ---
CASM, holding fuel rate constant and excluding special charges (A)
$12.64 $12.29 2.8% $12.30 $12.07 1.9% ====== ====== ====== ======
(A) These financial measures provide management and investors the
ability to measure and monitor Continental's performance on a
consistent basis. (B) Both the cost and availability of fuel are
subject to many economic and political factors and are therefore
beyond the company's control. DATASOURCE: Continental Airlines
CONTACT: Corporate Communications of Continental Airlines,
+1-713-324-5080, Web Site: http://www.continental.com/
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