Co-workers’ profit sharing pool now exceeds $100 million
HOUSTON – Continental Airlines (NYSE: CAL) today reported third quarter 2006 net income of $237 million ($2.17 diluted earnings per share), which includes a $92 million gain on the sale of a portion of the company’s investment in Copa Airlines. Excluding net special charges of $1 million and the $92 million Copa gain, Continental recorded net income of $146 million ($1.36 diluted earnings per share).
Operating income for the third quarter was $192 million, an $83 million improvement over the same period of 2005, despite fuel price increases costing over $155 million and the negative impact of increased security measures that took effect on Aug. 10. In addition, results for the third quarter of 2006 include a $42 million accrual for employee profit sharing, bringing the cumulative accrued profit sharing pool to over $100 million.
„Thanks to the hard work of my co-workers, we are delivering great results, both financially and operationally,“ said Larry Kellner, Continental’s chairman and chief executive officer. „When we work together, we win together.“
Third Quarter Revenue and Capacity
Passenger revenue for the quarter increased 17.1 percent ($471 million) over the same period in 2005, to $3.2 billion, with double digit percentage growth in each mainline geographic region and in regional jet operations. Additional capacity and traffic, both domestic and international, and improved yield produced significantly higher revenue for the company. Consolidated revenue per available seat mile (RASM) for the quarter increased 7.4 percent year-over-year due to increased yield and record load factors in spite of elevated security concerns.
Continental continued its capacity growth during the quarter, growing its mainline capacity 8.6 percent and its consolidated capacity 9.1 percent compared with the same period in 2005.
Consolidated revenue passenger miles (RPMs) for the quarter increased 10.5 percent year-over-year on a capacity increase of 9.1 percent, resulting in a record consolidated load factor for the quarter of 82.2 percent, 1.1 points above the previous record set in the same period in 2005. Consolidated yield increased 6.0 percent year-over-year.
[GADS_NEWS]Mainline RPMs in the third quarter of 2006 increased 10.0 percent over the third quarter 2005, on a capacity increase of 8.6 percent. Mainline load factor was a record 82.7 percent, up 1.0 points year-over-year. Continental’s mainline yield during the quarter increased 5.5 percent over the same period in 2005.
During the quarter, Continental continued to achieve a domestic length-of- haul adjusted yield and RASM premium to the industry.
Passenger revenue for the third quarter of 2006 and period-to-period comparisons of related statistics by geographic region for the company’s mainline and regional operations are as follows:
Percentage Increase in
Passenger Third Quarter 2006 vs. Third Quarter 2005
Revenue Passenger
(in millions) Revenue RASM ASMs
Domestic $1,389 14.1% 7.6% 6.1%
Trans-Atlantic 636 16.7% 1.4% 15.1%
Latin America 354 24.3% 10.0% 12.9%
Pacific 251 13.4% 12.2% 1.0%
Total Mainline $2,630 16.0% 6.8% 8.6%
Regional $601 22.3% 8.6% 12.6%
Consolidated $3,231 17.1% 7.4% 9.1%
Operational Accomplishments
Continental’s employees continued to work together to deliver a record third quarter systemwide mainline completion factor of 99.8 percent during the quarter, operating 28 days without a single mainline cancellation. The company recorded a U.S. Department of Transportation (DOT) on-time arrival rate of 75.1 percent during the quarter, which was affected by bad weather, air traffic control ground delay programs, new security rules and record load factors.
„My co-workers did a tremendous job this quarter, and earned on-time bonuses for two out of the three months, despite operational challenges,“ said Jeff Smisek, Continental’s president. „I couldn’t be prouder of them, and I’m delighted that our financial results have permitted us to accrue over $100 million of profit sharing for my co-workers.“
Continental Airlines continues to be recognized for superior service. For the ninth year in a row, Continental outranked all of its U.S. competition in international Business Class service, according to results of a survey of Conde Nast Traveler readers published in the magazine’s October 2006 edition. Continental also placed highest among its network peers for domestic premium- class service. Rankings were determined using a variety of criteria including seat comfort/legroom, food, cabin service, amenities/technology, airport lounge clubs and frequent-flier privileges.
During the quarter, Continental submitted its case to the DOT for authority to serve New York/Newark-Shanghai, the largest U.S.-China market currently without daily nonstop service. The route proceeding is supported by over 110,000 signatures from civic parties, corporate travel partners, Continental employees, elected officials, the airline’s customers and other interested citizens.
Third Quarter Financial Results
Continental’s mainline cost per available seat mile (CASM) increased 5.9 percent in the third quarter compared to the same period last year, primarily due to record high fuel prices. CASM decreased 0.8 percent holding fuel rate constant and excluding employee profit sharing accruals and related payroll taxes, and special charges.
„It’s great to report another quarter of solid performance,“ said Jeff Misner, Continental’s executive vice president and chief financial officer. „Our cost control performance remains on target, and we’ll keep our focus, even in this improved revenue environment.“
Mainline fuel costs for the quarter increased $174 million over the third quarter of 2005, primarily due to a 17.8 percent increase in fuel prices compared to the same period last year.
Continental continues to enhance its fuel efficient fleet. Today the company announced that it has signed an agreement to acquire winglets for 37 of its 737-500 and 11 of its long-range 737-300 aircraft, with installation beginning in 2007. The company has already completed the installation of winglets on its entire fleet of 737-700s and -800s and plans to finish the installation of winglets on its entire 757-200 fleet in the fourth quarter of 2006. When these installations are complete, Continental will operate 230 narrowbody aircraft outfitted with winglets. Winglets lower drag and improve aerodynamic efficiency, which can reduce fuel consumption by up to five percent.
By year-end, the company expects to have improved fuel efficiency by nearly 25 percent per available seat mile as compared to 1998, as a result of several factors, including fleet modernization, improved operating procedures and implementation of fuel-saving technology like winglets and GE90 3D Aero blades.
During the third quarter, Continental recorded net special charges of $1 million consisting of an $8 million settlement charge related to lump-sum payments to retiring pilots and a $7 million reduction of previous charges related to permanently grounded MD-80 aircraft.
Continental ended the third quarter with approximately $2.5 billion in unrestricted cash and short-term investments.
Other Accomplishments
Continental contributed $79 million to its pension plans during the quarter and an additional $70 million to the plans in October. The contributions bring its 2006 pension contributions to $246 million. Since the beginning of 2002, Continental has contributed more than $1.1 billion to its pension plans.
Continental has accrued a cumulative profit sharing pool of over $100 million through Sept. 30, 2006. The actual amount of profit sharing that the company will be able to distribute to employees on Feb. 14, 2007, depends on the company’s full-year financial results and may exceed or be less than $100 million.
Continental converted 12 existing orders for Boeing 737 Next Generation aircraft into orders for 12 new Boeing 737-900ERs, expected to be delivered in 2008. Continental is the first U.S. carrier to order the extended-range twinjet that flies about 500 nautical miles farther than the existing 737-900. The new aircraft will have among the lowest operating costs in Continental’s fleet and will allow the carrier to serve high demand markets more efficiently.
Continental amended its $350 million loan facility secured by substantially all of its Pacific operations. The amended loan agreement lowered the interest rate, which is expected to save the company approximately $6 million annually.
Continental was awarded a $258 million, five-year mail contract with the U.S. Postal Service, the company’s largest cargo customer, effective September 30, 2006, extending Continental’s relationship with the U.S. Postal Service for five more years. The contract includes Priority, First Class and Express mail products within the U.S. and Puerto Rico.
Corporate Background
Continental Airlines is the world’s fifth largest airline. Continental, together with Continental Express and Continental Connection, has more than 3,200 daily departures throughout the Americas, Europe and Asia, serving 151 domestic and 136 international destinations. More than 400 additional points are served via SkyTeam alliance airlines. With more than 43,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with Continental Express, carries approximately 61 million passengers per year. Continental consistently earns awards and critical acclaim for both its operation and its corporate culture. For more company information, visit 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/company .
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 2005 10-K and its other securities filings, including any amendments thereto, which identify important matters such as the consequences of our significant financial losses and high leverage, terrorist attacks, domestic and international economic conditions, the significant cost of aircraft fuel, labor costs, competition, and industry conditions, including the demand for air travel, the airline pricing environment and industry capacity decisions, regulatory matters, disruptions in its computer systems, 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.
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CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES
FINANCIAL SUMMARY
(In millions, except
per share data) (Unaudited)
Three Months %
Ended September 30, Increase/
2006 2005 (Decrease)
Operating Revenue:
Passenger (excluding fees and
taxes of $361 and $315) $3,231 $2,760 17.1%
Cargo 117 102 14.7%
Other, net 170 139 22.3%
3,518 3,001 17.2%
Operating Expenses:
Aircraft fuel and related taxes 858 684 25.4%
Wages, salaries and related costs 743 646 15.0%
Regional capacity purchase, net 475 406 17.0%
Aircraft rentals 249 234 6.4%
Landing fees and other rentals 195 182 7.1%
Distribution costs 157 154 1.9%
Maintenance, materials and repairs 140 116 20.7%
Depreciation and amortization 99 97 2.1%
Passenger services 97 91 6.6%
Special charges (A) 1 3 NM
Other 312 279 11.8%
3,326 2,892 15.0%
Operating Income 192 109 76.1%
Nonoperating Income (Expense):
Interest expense (99) (106) (6.6)%
Interest capitalized 5 4 25.0%
Interest income 37 21 76.2%
Income from affiliates 15 27 (44.4)%
Gain on sale of Copa Holdings,
S.A. shares 92 --- NM
Other, net (5) 6 NM
45 (48) NM
Income before Income Taxes 237 61 NM
Income Taxes --- --- ---
Net Income $237 $61 NM
Earnings per Share:
Basic $2.64 $0.91 NM
Diluted $2.17 $0.80 NM
Shares used for Computation:
Basic 89.7 67.0 33.9%
Diluted 111.8 81.9 36.5%
(A) During the third quarter of 2006 and 2005, the company recorded
settlement charges of $8 million and $18 million, respectively,
related to lump-sum distributions from the pilot pension plan. These
charges were offset by reversals of previously recorded expense
related to permanently grounded aircraft of $7 million and
$15 million, respectively.
CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES
FINANCIAL SUMMARY
(In millions, except per share data) (Unaudited)
Nine Months %
Ended September 30, Increase/
2006 2005 (Decrease)
Operating Revenue:
Passenger (excluding fees
and taxes of $1,040 and $884)
$9,141 $7,647 19.5%
Cargo 336 298 12.8%
Other, net 494 418 18.2%
9,971 8,363 19.2%
Operating Expenses:
Aircraft fuel and related taxes 2,310 1,729 33.6%
Wages, salaries and related costs 2,159 2,009 7.5%
Regional capacity purchase, net 1,344 1,140 17.9%
Aircraft rentals 742 689 7.7%
Landing fees and other rentals 578 535 8.0%
Distribution costs 495 445 11.2%
Maintenance, materials and repairs 407 334 21.9%
Depreciation and amortization 292 293 (0.3)%
Passenger services 268 252 6.3%
Special charges (A) 5 46 NM
Other 923 836 10.4%
9,523 8,308 14.6%
Operating Income 448 55 NM
Nonoperating Income (Expense):
Interest expense (300) (304) (1.3)%
Interest capitalized 14 9 55.6%
Interest income 92 47 95.7%
Income from affiliates 49 67 (26.9)%
Gain on sale of
Copa Holdings, S.A. shares 92 --- NM
Gain on disposition
of ExpressJet Holdings shares --- 98 NM
Other, net 1 3 (66.7)%
(52) (80) (35.0)%
Income (Loss) before Income Taxes
and Cumulative Effect of Change
in Accounting Principle 396 (25) NM
Income Taxes --- --- ---
Cumulative Effect of Change
in Accounting Principle (B) (26) --- NM
Net Income (Loss) $370 $(25) NM
Earnings (Loss) per Share:
Basic $4.19 $(0.37) NM
Diluted $3.50 $(0.38) NM
Shares used Computation:
Basic 88.3 66.8 32.2%
Diluted 110.5 66.8 65.4%
(A) During the first nine months of 2006, the company recorded special
charges of $5 million, which consisted of settlement charges of
$37 million related to lump-sum distributions from the pilot pension
plan, a $14 million credit associated with the officers' surrender of
March 2006 restricted stock units and an $18 million reduction of
reserves related primarily to negotiated settlements on leased MD80
grounded aircraft. In the first nine months of 2005, the company
recorded special charges of $46 million, which consisted of a
curtailment charge of $43 million related to the freezing of the
portion of the defined benefit pension plan attributable to pilots,
an $18 million settlement charge related to lump-sum distributions
from the frozen pilot defined pension plan, and a $15 million
reversal of previously recorded expense related to permanently
grounded aircraft.
(B) In connection with the adoption of FAS123(R), the company recorded a
$26 million cumulative effect of an accounting change to accrue the
liability for fair value of restricted stock units as of
January 1, 2006.
CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES
STATISTICS
Three Months %
Ended September 30, Increase/
2006 2005 (Decrease)
Mainline Operations:
Passengers (thousands) (A) 12,522 11,642 7.6%
Revenue passenger miles (millions) 21,312 19,378 10.0%
Available seat miles (millions) 25,759 23,721 8.6%
Cargo ton miles (millions) 268 246 8.9%
Passenger load factor:
Mainline 82.7% 81.7% 1.0 pts.
Domestic 84.8% 83.5% 1.3 pts.
International 80.5% 79.8% 0.7 pts.
Passenger revenue per available
seat mile (cents) 10.21 9.56 6.8%
Total revenue per available
seat mile (cents) 11.38 10.63 7.1%
Average yield per revenue
passenger mile (cents) 12.34 11.70 5.5%
Cost per available seat
mile (cents) (B) 10.52 9.93 5.9%
Special charges per available
seat mile (cents) 0.01 0.02 NM
Cost per available seat mile, holding
fuel rate constant (cents) (B) 10.02 9.93 0.9%
Average price per gallon of fuel,
including fuel taxes (cents) 221.47 187.99 17.8%
Fuel gallons consumed (millions) 387 364 6.3%
Actual aircraft in fleet
at end of period 364 350 4.0%
Average length of aircraft
flight (miles) 1,478 1,434 3.1%
Average daily utilization
of each aircraft (hours) 11:30 10:58 4.9%
Regional Operations:
Passengers (thousands) (A) 4,806 4,263 12.7%
Revenue passenger miles (millions) 2,730 2,384 14.5%
Available seat miles (millions) 3,503 3,112 12.6 %
Passenger load factor 77.9% 76.6% 1.3 pts.
Passenger revenue per available
seat mile (cents) 17.15 15.79 8.6%
Average yield per revenue
passenger mile (cents) 22.01 20.61 6.8%
Actual aircraft in fleet
at end of period 274 261 5.0%
Consolidated Operations
(Mainline and Regional):
Passengers (thousands) (A) 17,328 15,905 8.9%
Revenue passenger miles (millions) 24,042 21,762 10.5%
Available seat miles (millions) 29,262 26,833 9.1%
Passenger load factor 82.2% 81.1% 1.1 pts.
Passenger revenue per available
seat mile (cents) 11.04 10.28 7.4%
Average yield per revenue
passenger mile (cents) 13.44 12.68 6.0%
(A) Revenue passengers measured by each flight segment flown.
(B) Includes impact of special charges.
CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES
STATISTICS
Nine Months %
Ended September 30, Increase/
2006 2005 (Decrease)
Mainline Operations:
Passengers (thousands) (A) 36,753 33,706 9.0%
Revenue passenger miles (millions) 59,963 53,583 11.9%
Available seat miles (millions) 73,678 67,022 9.9%
Cargo ton miles (millions) 793 743 6.7%
Passenger load factor:
Mainline 81.4% 79.9% 1.5 pts.
Domestic 83.8% 81.4% 2.4 pts.
International 78.7% 78.2% 0.5 pts.
Passenger revenue per available
seat mile (cents) 10.04 9.37 7.2%
Total revenue per available
seat mile (cents) 11.22 10.48 7.1%
Average yield per revenue
passenger mile (cents) 12.34 11.72 5.3%
Cost per available
seat mile (cents) (B) 10.53 10.13 3.9%
Special charges per available
seat mile (cents) 0.01 0.07 NM
Cost per available seat mile, holding
fuel rate constant (cents) (B) 9.92 10.13 (2.1)%
Average price per gallon of fuel,
including fuel taxes (cents) 208.20 167.58 24.2%
Fuel gallons consumed (millions) 1,109 1,032 7.5%
Actual aircraft in fleet
at end of period 364 350 4.0%
Average length of aircraft
flight (miles) 1,438 1,387 3.7%
Average daily utilization
of each aircraft (hours) 11:12 10:35 5.9%
Regional Operations:
Passengers (thousands) (A) 13,763 11,862 16.0%
Revenue passenger miles (millions) 7,783 6,582 18.2%
Available seat miles (millions) 9,959 8,878 12.2%
Passenger load factor 78.1% 74.1% 4.0 pts.
Passenger revenue per available
seat mile (cents) 17.48 15.42 13.4%
Average yield per revenue
passenger mile (cents) 22.36 20.80 7.5%
Actual aircraft in fleet
at end of period 274 261 5.0%
Consolidated Operations
(Mainline and Regional):
Passengers (thousands) (A) 50,516 45,568 10.9%
Revenue passenger miles (millions) 67,746 60,165 12.6%
Available seat miles (millions) 83,637 75,900 10.2%
Passenger load factor 81.0% 79.3% 1.7 pts.
Passenger revenue per available
seat mile (cents) 10.93 10.08 8.4%
Average yield per revenue
passenger mile (cents) 13.49 12.71 6.1%
(A) Revenue passengers measured by each flight segment flown.
(B) Includes impact of special charges.
CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
Three Months Ended September 30, 2006
Earnings per Share 2006
Diluted earnings per share $ 2.17
Adjustments:
Special charges 0.01
Gain on sale of Copa Holdings, S.A. shares (0.82)
Diluted earnings per share, excluding special items (A) $ 1.36
Three Months Ended
September 30, 2006
Net Income (in millions) 2006
Net income $237
Adjustments:
Special charges 1
Gain on sale of Copa Holdings, S.A. shares (92)
Net income, excluding special items (A) $146
Three Months %
Ended September 30, Increase/
CASM Mainline Operations (cents) 2006 2005 (Decrease)
Cost per available seat mile (CASM) $10.52 $9.93 5.9%
Less: Current year fuel cost per
available seat mile (B) (3.33) --- NM
Add: Current year fuel cost
at prior year fuel price per
available seat mile (B) 2.83 --- NM
CASM holding fuel rate constant (A) 10.02 9.93 0.9%
Less special charges (0.01) (0.02) NM
Less profit sharing and related taxes (0.18) --- NM
CASM holding fuel rate constant
and excluding special charges
and profit sharing (A) $9.83 $9.91 (0.8)%
(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.
CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES
Nine Months %
Ended September 30, Increase/
CASM Mainline Operations (cents) 2006 2005 (Decrease)
Cost per available seat mile (CASM) $10.53 $10.13 3.9 %
Less: Current year fuel
cost per available seat mile (B) (3.13) --- NM
Add: Current year fuel cost
at prior year fuel price per
available seat mile (B) 2.52 --- NM
CASM holding fuel rate constant (A) $ 9.92 $10.13 (2.1)%
(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.
SOURCE Continental Airlines
